When you talk about prominent cases of tax evasion in Germany today, few remember the Flick affair that made headlines in the early 1980s. At that time, the tax investigation followed a trail that led to the headquarters of a powerful German industrial group, the Friedrich Flick Industrial Administration KGaA. But the trail did not end there. It turned out that the tax evasion went back into black coffers of the group. With this black money, politicians of all parties represented in the Bundestag at that time were considered without specifically asking for their goodwill. That is how you have to put it, because an actual bribe could never be proven. After all, the tax investigation was also able to bring other parties involved in tax evasion, in particular the then Federal Minister for Economic Affairs Hans Friedrichs and Otto Graf Lambsdorff; Indeed, they left the high benefits they received untaxed.

West German post-war history is characterized by entrepreneurs who already had some significance in the Nazi era. The name Flick is especially important. Friedrich Flick led one of the largest industrial groups in Germany until the end of the Second World War. Since he was one of the wealthiest people in Germany even after the war, it was relatively easy for him to build a new industrial empire.

His son Friedrich Karl Flick inherited this property in 1972. However, he had no motivation to lead the company himself. So he left the business to his childhood friend Eberhard von Brauchitsch. Von Brauchitsch, on the other hand, was faithful to Flick. However, he also knew how important it could be for the Flick Group to be well connected in federal politics. Therefore, he entered an ambitious donation program, with which he considered both the parties represented in the Bundestag at that time and a selection of prominent top politicians of all stripes. So you could say he was true to the motto: keep your friends close to you, but your enemies even closer.

And soon there was also an opportunity to demand favors. Because the Flick Group wanted to separate from a large package of Daimler shares. However, the profits achieved in the amount of a good DM 1 billion should remain tax-free if possible. This was already legally possible at that time via § 6b EStG. However, such a step required at that time still a permit from the Federal Ministry of Economic Affairs, which certified that the reinvestment of the profit had a benefit worthy of economic support.

But before we go into whether the profits could actually be tax-free, we still have to talk about the money contributions of the group.

A few years ago, Löhr had done a favor to the Steyler missionaries, a Catholic missionary order, by opening donations from a variety of wealthy sources. For this, Löhr had regularly received part of the grants, more precisely 10%, as a commission. However, the Order had also provided a return, because 80% of the donations came back to their donors on secret paths. Only the remaining 10% ultimately remained with the Order.

It was thus a donation laundering system: the donors could set their donations for tax purposes, thus significantly saving on taxes, and still receive 80% back. In fact, all participants benefited from this scam, because in the end everyone had increased their money stock, albeit at the expense of the general public.

The Flick Group with its more than 300 companies regularly donated large sums of money via various subsidiaries to a Catholic organization of the Steyler missionaries, namely the non-profit company Soverdia Gesellschaft für Gemeinwohl mbH, which managed the assets of the Order. This in turn now had the task of secretly returning the majority of the previously donated sums to the group (and the other donors). For this purpose, Father Josef Schröder, the Soverdia Managing Director, had a contact person who cooperated with the accountant of the Flick Group, Rudolf Diehl.

Father Schröder first transferred the donations to the Soverdia account of a Swiss bank. At the same time, annual meetings took place between the representative of the Soverdia and intermediaries in Switzerland, where the money was handed over, usually in cash. Subsequently, the money returned to Germany, where it was managed by accountant Diehl in the Flick Group’s black coffers. This involved a total of DM 12.3 million. In this way, the Flick Group had enough financial resources to make discreet visits to influential politicians.

At the same time, the Flick Group has declared the donations to the non-profit company Soverdia as a tax deduction in its tax returns and thus saved taxes on the taxation of its profits. However, since the group had largely recovered the funds, this clearly constitutes tax evasion. And for this, the responsible persons of the Flick Group had to answer in court. But more on that in a moment.

We have described how the Flick Group acted, but the circumstances that led to the discovery of the Flick affair are also very exciting. This is why we are going into more detail in this chapter.

A surprising turn came only a few weeks later, because Father Schröder transmitted a written confession through his legal counsel. In it, he charged the head accountant of the Flick Group, Rudolf Diehl. He also explained how the money laundering of the donations paid to Soverdia by returns to donors worked. Furthermore, he confirms that Walter Löhr submitted the proposal to him for this lucrative business for all parties involved. It was also advantageous for the CDU politician Löhr. However, only until 1975, because in 1976 he died before he could collect his annual commission. Even more explosive, however, was that there were also first indications that Flick shareholders and Managing Director Eberhard von Brauchitsch was also familiar with these machinations.

With this information, the Sankt Augustin tax investigation was able to carry out further house searches. In this way, she initially fell into the hands of a black briefcase with keys to bank lockers. In the bank lockers were finally the notebooks, in which Diehl had meticulously recorded all payments that had flowed through the black coffers. Among them were Franz Josef Strauß, Helmut Kohl, Rainer Barzel, Hans Friedrichs and Otto Graf Lambsdorff as well as many other politicians of all parties represented in the Bundestag, i.e. CDU/CSU, SPD and FDP.

From that point on it was clear that the tax evasion initially pursued by purely tax law also had an enormous political dimension. So this was the point where it was hard to deny that the Flick affair from the outset was only about securing influence over politics.

Rudolf Diehl, on the other hand, hit the penalty much more sensitive. He had to pay a fine of DM 540,000. Even harsher was the court sentence against Eberhard von Brauchitsch, who was to serve a prison term of two years. For a payment of DM 550,000 fine, however, the prison sentence was suspended on probation.

The two top FDP politicians Hans Friedrichs and Otto Graf Lambsdorff also found the judges guilty of tax evasion. However, they were concerned that they left the received funds untaxed. Friedrichs therefore had to pay DM 61,500 and Count Lambsdorff DM 180,000. It is true that the two former Ministers of Economy were not able to prove corruption; They were rather forcibly acquitted of this. They still lost all their offices. Nevertheless, they continued to be active in politics and business only a little later.

Let us now return to the facts of profits from the Flick Group’s share business. After all, at that time it was a profit of about DM 1 billion.

By the way, it may be significant that the stock business was already tricky set up. The Flick Group made the Deutsche Bank believe that the Shah of Persia was also interested as a potential buyer. This convinced Deutsche Bank to purchase Daimler shares on these profitable terms.

In fact, one might think that the numerous financial contributions of the Flick Group that had preceded the sale fulfilled their purpose. The same applies to payments made during the period in which the favourable assessment of the tax exemption by the ministries involved was pending. After all, the tax exemption took place, although many a reinvestment flowed abroad, thus objectively hardly appeared to be conducive to the German economy. Was there really bribery?

But even the policy that had suffered enormous damage from the Flick affair could hardly be satisfied with this verdict. Well-known politicians devised an amnesty law, especially the then Chancellor Helmut Kohl, who himself had received payments from the Flick group. Remarkably, however, he had no memory of these benefits when he had to testify before the parliamentary committee of inquiry. But the public pressure was now so high that the adoption of such a quasi-self-relieving amnesty law was hardly politically representative.

So it’s time for a conclusion.

In summary and in retrospect, it must be noted that years later the CDU was bluntly revealed by receiving secret party donations, which also flowed into black party coffers, and the refusal of the former Chancellor Helmut Kohl to name the donors, that German politicians were apparently unwilling to show any insight and drew no lessons from the Flick affair.

There had already been a ban on party donations in the Basic Law, so that financially stronger circles could not have a beneficial influence on politics compared with financially weaker ones. But this was too uncomfortable for the old parties, because it broke away a significant part of their funding. Therefore, they changed the Basic Law, so that nowadays party donations are allowed. To a certain extent, they are even tax deductible.

But at least today this is hardly conceivable, right? Well, anyone who is surprised that a former first mayor of Hamburg went to meetings with bankers because they wanted to prevent illegal tax refunds from cum-ex transactions back, may already guess the answer. Precarious about this is certainly in addition that this former mayor in detail now also seems to have no memory of these conversations. Should one therefore also take into account that companies close to those same banks paid generous donations to the mayor’s party?

Perhaps the Flick affair is already too far behind for us to remember such connections today. Because even the memory of voters in Germany seems to be subject to a general reset every four years. How else could one explain that such a person is entrusted with the post of Federal Finance Minister? How can we understand that he is elected Chancellor?

And the conclusion? As long as it is possible to distinguish legally between bribery and corruption, as long as influence in the interests of individuals remains hidden from the general public, and as long as the general public, which is itself highly affected, does not really demand effective protection against such practices, it is only a matter of time before we will report on the next case of reprehensible interdependence between money and power.

We love taxes, albeit as tax consultants for many, very different reasons. But we should all love taxes, because they are the real basis of the unity in law and freedom invoked even in our national anthem. After all, it is taxes that hold our state and thus our society together; No Dr. Faust, no national football team and no Sauerkraut recipe with Bratwurst can do that.