Global Policy Forum

By Edmund L. Andrews

Frankfurt -- The former German chancellor, Helmut Kohl, who has been facing widening accusations of having run illegal political slush funds, admitted Tuesday that he had used cash from secret bank accounts to help local branches of his party, the Christian Democratic Union. Kohl's admission aggravated a nationwide uproar that began three weeks ago, after disclosures that the party's former treasurer secretly accepted one million marks, about $670,000 at the time, from an arms merchant in 1991.

It has heated up as prosecutors have turned up evidence that Kohl's party maintained numerous secret bank accounts that may have been used to accept illegal political contributions from business groups. Kohl, who engineered Germany's reunification, was chancellor for 16 years before losing an election last year. Until Tuesday, he had dismissed all the allegations as "a lot of noise about nothing."

But some of his own former colleagues have gone public with their own allegations in the last few days. Heiner Geissler, who was general secretary of the Christian Democratic Union from 1977 until 1989, said on Monday that he had repeatedly argued with Kohl about the secret accounts and that the former chancellor knew everything about them.

Tuesday, Christian Democratic leaders acknowledged that there may indeed have been improper financial dealings and that these may have persisted until as recently as a year ago. There have been no allegations so far that individual political leaders enriched themselves. The main question is whether the party has been selling influence.

In an uncharacteristically contrite written statement, Kohl admitted using secret accounts to provide financial support for local party branches. "I have, as chairman of the party, deemed as necessary the confidential treatment of certain issues, such as special payments to party branches and associations," Kohl said in his statement. Kohl said it was reasonable to describe the secret accounts as having been "managed separately" from those of the party's normal federal treasury. He said he regretted that he may have allowed a "lack of transparency" in party finances and perhaps even a violation of the party's own rules. "That is not what I wanted," he added.

Prosecutors are investigating what appears to be a network of accounts. The Parliament plans to establish a special investigative committee on Thursday as well. The Christian Democratic Union has hired the accounting firm of Ernst & Young to examine its books. "It is possible that not all the party rules were adhered to," said Wolfgang Schäuble, Kohl's successor as chairman of the Christian Democratic Union. But he added: "No one enriched themselves."

The investigation could lead to criminal charges against some Christian Democratic officials. Under German law, political parties are required to disclose publicly all contributions and their sources. Prosecutors are also investigating whether people who either accepted or channeled covert contributions evaded taxes.

The most damaging allegation -- but the hardest to prove -- is that Kohl and other party leaders sold favors for large sums of money. Whatever happens, the disclosures threaten to tarnish Kohl's reputation as the statesman who reunified Germany and was Europe's most formidable political leader throughout the 1990's. They will also will be a major political blow to the Christian Democrats, who were just beginning to recover from their devastating electoral defeat last year to the Social Democratic Party of Chancellor Gerhard Schrí¶der.

The first allegations surfaced early this month, as a result of a long-running investigation into tax evasion by a Walther Leisler Kiep, who served as the Christian Democrats' treasurer for many years, until 1991. Tax investigators charged that Kiep had failed to pay taxes after receiving one million marks from an arms trader, Karlheinz Schreiber. At the time, Schreiber was trying to get government approval for the sale of Panzer tanks to Saudi Arabia.

Schreiber, whom the German authorities are trying to extradite from Canada, reportedly handed Kiep a suitcase filled with cash. Kiep admitted receiving the money, but insisted that he had merely put it in a special party-controlled bank account. In a recent interview with the Frankfurter Allgemeine Zeitung, Kiep said he knew Schreiber "wanted to do something good for the party" but had no idea that one million marks would be handed over.