Bankers told to pay fines or face prison after tax inquiry

A GERMAN court yesterday ordered two executives of Dresdner Bank AG to serve prison terms or pay heavy fines for abetment of tax evasion.

The executives, the director of the main Koblenz branch and the head of the branch's foreign department, have two weeks to contest the order, the city's chief state prosecutor, Mr Norbert Weise, said.

If they do not contest it, the director will serve four months in jail or pay a fine of DM500,000 (£210.101). His colleague faces one year in jail or a DM300,000 fine.

If the executives contest the sentence, the case will go to trial. Mr Weise had asked the Koblenz district court to issue the order to avoid the expense of a trial.

The case is linked to the sentencing of a Dresdner client for tax evasion in February.

The two Dresdner employees allegedly helped a client evade tax by transferring funds to Luxembourg.

Mr Weise said the head of the foreign department also allegedly helped another customer evade tax.

Investigators have descended on Dresdner Bank AG and other banks including DG Bank and Commerzbank AG over the past two years, searching offices and seizing documents in a crackdown on alleged aiding and abetting tax evasion by financial institutions.

The probe followed the exodus of billions of D-marks to Luxembourg and other tax havens after Germany slapped a 30 per cent withholding tax on interest income in 1994.

Moving funds abroad to avoid that tax is not illegal, but failing to report interest income to fiscal authorities in Germany is in breach of the law.