Missing the marks: East Germany's fall left others to find vanished state money

April 17, 1994|By Dan Fesperman | Dan Fesperman,Berlin Bureau of The Sun

BERLIN -- As the creaky old Communist regime of East Germany vanished into history in 1990, billions of dollars in state money vanished with it, presumably ending up in locked suitcases and mysterious foreign bank accounts.

Now, four years after German officials began searching for the money, they're offering rewards of up to $3 million to anyone who can put them on a fresh trail to the missing riches.

The officials made their appeal recently with large advertisements in more than 30 German newspapers and magazines, mostly in the five states of the former East Germany. The campaign even leaped across the German borders, with the ad running in one newspaper in Austria and another in Switzerland, scenic land of discreet bankers and funny money.

The object of the ads was simple: to entice some of the accomplices to rat on each other.

"The goal is to break loyalties -- that's why the reward is so big," said Klaus-Dieter Benewitz, spokesman for one of two agencies seeking to ferret out the money. "You see, usually the people who know something are former Communist Party and government officials, usually high-ranking officials."

Mr. Benewitz's organization is the Independent Commission for the Investigation of Property of Parties and Mass Organizations of the German Democratic Republic. Also looking for the money is the Treuhand, the agency set up in 1990 to privatize or dispose of every government-owned business and asset in the former East Germany.

The Treuhand could do with a hefty windfall. So many East German businesses have proven to be debt-ridden disasters that by the time the agency closes out its books later this year, it will have cost the government more than $150 billion.

In the days since the ads ran, Mr. Benewitz said, "We've gotten hundreds of calls, faxes and letters. Quite a few of them were jokes, insults and that kind of stuff. But more than 50 tips seem to be serious, and in those cases we will start investigations soon."

$1.8 billion so far

Even before the ads, the effort over the past four years had rounded up about $1.8 billion, in spite of the confusion left behind in most of the accounting ledgers. The East German bookkeeping for intertwined party and government accounts was either so sloppy or so sinister that authorities still aren't even sure how much money remains to be found.

Christian Hammerstein, chairman of the independent commission, has said it numbers at least in the "hundreds of millions" of deutsche marks (at about 1.68 per dollar), and the ads cited "many millions."

But Mr. Benewitz conceded: "It is all speculation. We assume it is less than the amount we've already recovered, but we do not know for sure. Even the number in the ad is speculative."

For all the financial confusion the Communists left in their wake, the money recovered so far has been relatively easy to find. "It was almost all in Berlin banks," said Christian Hossbach, a Treuhand spokesman. Authorities figure most of the rest has been hidden with one of three methods.

In suitcases

"The simplest way is the 'Koffergeschaefter' [literally, 'suitcase business']," Mr. Hossbach said. "You put millions of marks into your suitcase and you cross the border. We think this happened in the days after the Berlin Wall came down [in 1989], up until the spring of 1990."

That spring was when German authorities, sensing a huge leak of cash, seized control of East German assets and Communist Party accounts.

The second method was a matter of somehow putting money into Swiss bank accounts. Swiss accounts are protected by some of the world's tightest banking privacy laws, and %o authorities concede that some of this money might as well have been thrown into quicksand. But with a reward in the offing, who knows?

The third escape route was the trickiest. It involved a vast, complicated network of foreign accounts that the East Germans had built slowly over the years.

The accounts were set up to amass a supply of Western currencies, which would be available whenever East German businesses needed to buy equipment from companies in the West. That's because those companies wouldn't accept any of the flimsy East Bloc currencies.

Trouble was, the East German businesses had to make such purchases through their government, which charged exorbitant exchange rates for the privilege, and the transactions could drag on for months.

Government gouging

One result is that the debts left behind in the books of many East German companies were artificially inflated by the government gouging, Mr. Hossbach said. Another result is that a few clever people apparently used the same foreign accounts to squirrel away money as the government began to collapse.

As an indicator of how tough it's been to track down these transfers, only about $60 million of the $1.8 billion recovered has come from such accounts.

That's where the ads come in, hoping that the promise of a reward will unlock the deepest secrets of obscure account numbers and hidden ledgers.

Those whose tips lead to recovery of less than 1,000 deutsche marks ($600) will get 5 percent of the take. Higher amounts will yield only 3 percent rewards, up to a limit of 5 million marks ($3 million). But financial reward is not the only incentive.

"These people do not have to fear criminal prosecution if they help us out," Mr. Benewitz said.

And, as the ads say, "Tips can be given in person or through a mediator or lawyer. Confidentiality is guaranteed. You can call the Treuhand day and night."

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