West German Firm Accused of Bribery

As West German politicians prepare for the March 6 general election, most campaign rhetoric has focused on the recession, unemployment and the arms race. But in recent weeks, reports of corporate bribery in the parliament have raised concerns about the integrity of the political system itself.

The reports concern allegations that the Friedrich Flick group, a large family owned corporation, has given substantial bribes to political parties. In exchange, Flick received favorable tax breaks allowing the company to buy into a large U.S. chemical firm, W.R. Grace and Company.

A number of prominent politicians and bankers have been implicated in the scandal, including Chancellor Helmut Kohl and Hans Friedrich, formerly Minister of the Economy and now President of West Germany's second-largest bank. Politicians in the Free Democratic and Social Democratic parties have also been implicated.

Flick's principal owner, Friedrich Karl Flick, is one of the richest men in West Germany. Flick has holdings in national and multi-national corporations as diverse as car-maker Daimler-Benz; the insurance company Gerling; Krauss Maffei, a major European arms producer; Dynamit Nobel; and, in the U.S., W.R. Grace. The Flick family gained much of its wealth under the Hitler regime, and was a primary funder of the Nazis in the 1930s and 1940s.

In 1981 the Bonn District Attorney launched an investigation of Flick's financial dealings. Over 250 files and ledgers were seized. The investigation uncovered evidence that for over ten years, Flick made payments - running into the millions of dollars - to key officials and political parties in the government. The payments allegedly "bought" a favorable tax break.

After selling DM 2 billion worth of Daimler-Benz stock (29%) to the Deutche Bank in 1975, investigators say, Flick was given a total waiver of a DM 840 million ($400 million) tax on the sale. The sale of the Benz stock was used to purchase 12% of W.R. Grace, making Flick Grace's largest shareholder. The sale also allowed Flick to gain control of the Flick family corporation from his nephews.

The government justified the tax breaks on the grounds that Flick's purchase of W.R. Grace stock would help Germany gain access to American markets and technology.

While denying any wrongdoing in the case, three top Flick managers have been forced to resign. Chancellor Helmut Kohl admits receiving some money from Flick, but says it was only a regular political contribution to his Christian Democratic Party. Freidrich also maintains his innocence, but has refused to comment publicly.

Under West German law, the government can free a corporation from paying taxes for a transaction if it decides the sale benefits the economy as a whole. But so far, government officials have had a hard time explaining how the West German economy benefited from Friedrich Flick buying out his nephews, and spending 800 million marks on a U.S. corporation.

Konrad Ege is a Washington-based, German journalist. He has reported for Counterspy and Pacifica Radio.