Global Policy Forum

By Roger Cohen and John Tagliabue

Berlin - Prosecutors estimate that more than $70 million was illegally paid in kickbacks to middlemen on the sales of tanks and a dilapidated oil refinery during the rule of Helmut Kohl, the former chancellor whose once glowing reputation has already been battered by revelations of secret party financing.

The findings, part of investigations in Germany, Switzerland and France, are not yet complete. But they suggest possible corruption at the highest levels of the Kohl government potentially more damaging to Mr. Kohl than the unrelated illegal party contributions he has already acknowledged.

Reinhard Nemetz, the chief prosecutor heading the investigation in the Bavarian town of Augsburg, said at least $12 million was paid in kickbacks on the sale of 36 German tanks in 1991, part of it to Ludwig-Holger Pfahls, then the second-ranking defense official in Mr. Kohl's government.

A further $60 million was paid in murky "commissions" on the sale to the French oil company Elf Aquitaine of the rusting Leuna refinery in the former East Germany, judicial officials said, adding that Mr. Pfahls was present at a meeting at the German chancellery at which the sale was discussed.

Mr. Nemetz said he had evidence indicating that Mr. Pfahls received $2 million on a Swiss bank account in the fall of 1991, apparently for rushing the sale of the tanks to Saudi Arabia. After an arrest warrant was issued for Mr. Pfahls, 57, he failed to arrive in Munich from Asia as expected last July, and has not been seen since.

The investigation of the tank sale and the oil refinery are not related to separate investigations into the millions of dollars in political contributions that Mr. Kohl and his party, the Christian Democratic Union, have admitted receiving secretly during his rule. But their political implications appear broad. Prosecutors have identified three beneficiaries of the kickbacks: Mr. Pfahls, who was the former head of Germany's domestic intelligence services; Pierre Lethier, the former chief of staff of two heads of the French external security services, and Dieter Holzer, a businessman with known links to German intelligence.

What prosecutors do not as yet know is whether those men channeled some of the money to Mr. Kohl's Christian Democrats. The files relating to the Elf sale have disappeared from the chancellery and last week Mr. Kohl's successor, the Social Democrat Gerhard Schrí¶der, announced a formal investigation into the disappearance. The Elf deal was an important symbol of French-German rapprochement after differences over unification. Prosecutors are now examining whether it also provided funds for Mr. Kohl's tightly fought 1994 election campaign.

France had a deep interest in a victory by Mr. Kohl because he was viewed as committed to leading Germany into a more unified Europe and abandoning the German mark in favor of the euro. The cases amount to a time-bomb ticking under Mr. Kohl, who has insisted that his "honor" prevents from identifying people who secretly gave him more than $1 million for his party between 1993 and 1998. Mr. Kohl has dismissed as "character assassination" suggestions that the refinery sale was essentially a ploy to raise cash for his party.

But Loik Le Floch-Prigent, the Elf chief executive at the time of the purchase, clearly thought otherwise. Referring to Mr. Kohl and former President Franí§ois Mitterrand of France, he told French prosecutors on June 19, 1997, "I was pushed by the president of the republic and by the chancellor." In a statement obtained by the French daily Le Monde, he continued, "It was a question of demonstrating that France was present in the process of German reunification and, for Germany, of being able to show off that presence."

Certainly, Elf's purchase of the refinery made little commercial sense. Only now, eight years later, are there signs of profits, and that follows hundreds of millions of dollars in German aid, costly removal of unneeded equipment, and an $842 million write-off on the purchase by Elf last year. Investigation of the sale of 36 "Fuchs Spurpanzer" tanks by Thyssen Industrie to the Saudis began five years ago when Giorgio Pelossi, and Karlheinz Schreiber, a prominent German-Canadian arms broker, had a falling out and Mr. Pelossi decided to talk to investigators. More recently he was arrested in connection with Italian drug-trafficking charges and is being held in a federal facility in Chicago, according to the United States Attorney's office there. Mr. Pelossi has said he wants to fight the charges in Italy, where he expects to return.

After Mr. Pelossi talked with German investigators, a search of Mr. Schreiber's home revealed diaries and other documents that appeared to chronicle his role in the tank sale and pointed to Mr. Pfahls. "Saudi Arabia, fearful of Iraq, wanted the tanks fast because they are resistant to chemical and biological weapons," Mr. Nemetz said. "But that sort of sale needs an export license from the highest political levels, and this is where Mr. Pfahls could help. He was also decisive in approving a very unusual arrangement to speed up the deal."

Mr. Pfahls, who had long known Mr. Schreiber, first wrote to the chancellery urging approval of the sale on Oct. 4, 1990. He kept pressing. Then, when it became clear that Thyssen could not produce the tanks in time to meet Saudi Arabia's demand, he helped engineer an extraordinary three-way deal. According to Mr. Nemetz, Saudi Arabia would pay Thyssen $234 million for the tanks, the German Army would deliver recently produced tanks to the Saudi Army, and Thyssen would build new tanks to replace what the German Army had given up.

"It was an arrangement approved personally by Mr. Pfahls, after the political permission for the sale was given," Mr. Nemetz said. "But it was an extraordinary political decision because it left our army with just 24 Fuchs tanks." Prosecutors now believe that in September 1991, Mr. Schreiber -- the transaction's go-between -- paid 3.8 million marks, or $2 million, into an account he had opened for Mr. Pfahls in Switzerland.

Just days earlier, on Aug. 26, 1991, Mr. Schreiber has acknowledged that he paid one million marks in cash at a meeting in Switzerland to Walther Leisler Kiep, a prominent Frankfurt businessman, and Horst Weyrauch, a close ally of Mr. Kohl, who were then in effect the treasurers of Mr. Kohl's party. A day later, Mr. Weyrauch, who says he handled most of the anonymous payments to the party, deposited the cash into a secret account.

Mr. Weyrauch has since resigned from the party and on Feb. 2 met for six hours with party officials to discuss his handling of party funds. He has admitted that he received funds from Mr. Kohl, but said he did not know the identity of the donors. Mr. Schreiber, who is now in Canada and has been charged with tax evasion in Germany, is fighting extradition. In an interview in December, he called Mr. Nemetz's portrayal of the tank sale a lie. He said the deal had been hurried in response to pressure from the Bush administration after Iraq invaded Kuwait in 1990.

As for paying $2 million to Mr. Pfahls, Edward Greenspan, a Toronto lawyer for Mr. Schreiber, said it was "a wild and unsupported accusation out of the mind of Nemetz." He said it was based on a mistaken reading of an entry seized in one of Mr. Schreiber's bank accounts whose records were made available to German investigators by the Swiss authorities. Mr. Nemetz said Mr. Schreiber had received close to $12 million as a commissions for his part in the tank deal, out of which he paid Mr. Pfahls and the Christian Democratic Union treasurers.

Mr. Kiep, like Mr. Pfahls, also figures prominently in the Elf deal. "My job was to try to interest oil companies in the Leuna project," Mr. Kiep said in an interview. "I played an important role in bringing Elf on board as investor." He declined to comment on the cash received from Mr. Schreiber after the tank sale and passed on to the Christian Democrats. One year after the tank sale, the refinery sale went through.

"The commitment made in Germany by Elf was stupid," said Philippe Jaffré, who succeeded Mr. Le Floch-Prigent as Elf's chief executive in March 1993. "But people in management were using the company to enrich themselves. Billions of francs were diverted from Elf under every pretext, with the signature of my predecessor," he said in an interview, referring to Mr. Le Floch-Prigent. A lawyer for Mr. Le Floch-Prigent, Olivier Metzner, could not be reached. Mr. Le Floch-Prigent has been charged with fraud in France.

French prosecutors, led by Eva Joly in Paris, have discovered that a substantial part of that "diverted" money was paid by Elf during the refinery purchase. On Dec. 24, 1992, as first revealed by Le Monde, Elf paid 256 million francs -- $39 million -- to an account at Handelsfinanz-CCF Bank in Geneva, controlled by a mailbox company called Nobelpac S.A.

That money was then divided between Mr. Lethier, a top official in the French external security services until the late 1980's, and Mr. Holzer, the German businessman with links to his country's security services, Swiss prosecutors say. Mr. Holzer now lives in Monaco and could not be reached for comment. He has issued a notarized statement saying he had not given any of the money to political parties. Mr. Lethier lives in Geneva. A call to his house was not returned.

Nobelpac, the Swiss company through which the money moved, is controlled by André Guelfi. a Swiss-based French businessman. Formally, he was remunerated as a "consultant." But he has openly suggested that he was no more than a vehicle through which to disguise the real beneficiaries of the refinery deal. "I put my offshore company at the disposition of Elf, which sent a lot of money," Mr. Guelfi told Le Monde. "Then I passed the money to the accounts I was given. Voila!"

Calls to Nobelpac for this article were not answered. The contract with Nobelpac was signed on Sept. 21, 1991, by André Guillon, the former head of refining at Elf, who is now in prison in France, where he has been charged with fraud. Mr. Guillon justified the contract in a letter to Elf's chief executive, Mr. Le Floch-Prigent, dated Sept. 12, 1991.

As published in the Paris daily newspaper Le Parisien, it said: "For the success of the project, the intervention of one or several external consultants will be necesssary. They should know German institutions well and especially the mechanisms of financial aid available. I have a proposition from Nobelpac. The terms it proposes are subject to Elf obtaining notable sums in state aid and subsidies." In the letter, Mr. Guillon seemed to suggest that the payment to Nobelpac would promote German aid and subsidies for the Elf-Leuna project. Bernard Gorny, Mr. Guillon's lawyer, declined to comment. On the same day that Nobelpac received the money in 1992, it wired 220 million francs -- $33.8 million -- to a company registered in Liechtenstein called Stand-By Establishment, and the remaining $5.2 million to the Swiss account of a company called Showfast Ltd.

Swiss prosecutors say both companies appeared to be controlled by Mr. Lethier and Mr. Holzer, who have not denied receiving the sums. The money was later moved, at least in part, to Liechtenstein foundations. Paul Perraudin, a Geneva prosecutor, has told Le Monde that one foundation, Delta International, is believed to be a front for Mr. Holzer's activities; another, Foundation Thais, is thought to be a front for Mr. Lethier.

Some of those accounts were frozen in January. Swiss and French prosecutors believe that Mr. Guelfi received more than $4 million for his services. Those included a second use of his company in 1993 with a payment of over $20 million by Thyssen in connection with its partnership with Elf in certain projects at Leuna. Mr. Guelfi justified the payment -- bringing total commissions paid to about $60 million -- by producing false "feasibility studies." At the groundbreaking ceremony for the new Leuna refinery in 1994, Mr. Kohl called it "the most important Franco-German industrial project since World War II." He did not explain why.