It's not theft--it's whistleblowing!

You may not have been following the story, but a few days back, Germany announced that it was purchasing the names of 1,400 foreign account holders--presumptively tax evaders--at Liechtenstein bank LGT. 600 of those account holders were German, and many of the rest from other rich countries with whom Germany has been eagerly sharing the data. There turns out to be a fairly fascinating back story to all this:

Keiber worked for the division between April 2001 and November 2002 and had the job of checking documents that were being scanned and transferred into electronic databases.

LGT didn't know at the time that it hired Keiber that he had a dubious past. In 1996 he was involved in a real estate deal in Spain that he financed with uncovered checks. Since he hadn't been charged, he didn't have a criminal record at the time he joined the bank.

However, Keiber's dodgy Spanish real estate deal followed him to Liechtenstein. In 2001, he was fined 600,000 Swiss francs ($552,000) for fraud by the Liechtenstein judicial system.

Kieber left LGT and the country in November 2002, but before doing so, he created four DVDs containing the details of the client data he had been scanning. LGT said he had been hoping to use the data to blackmail Liechtenstein's legal authorities. "He was not disgruntled about LGT," a spokeswoman from the bank said. "He felt that he was unfairly treated by the legal authorities."

In January 2003, Kieber sent a letter and a tape cassette to Prince Hans-Adam of Liechtenstein, saying that he had been unfairly treated by the country's judicial authorities. He demanded help in solving his legal difficulties, including the issuance of two new passports, and threatened to pass on the stolen client data to foreign media and authorities.

Liechtenstein refused the demands and put out a warrant for Kieber's arrest, but LGT took a softer approach--it managed to make contact with Kieber and coax him back to the country to face the legal consequences by offering to pay for his legal counsel and his apartment in Liechtenstein. During the subsequent court proceedings, the four DVDs were returned to the bank and destroyed.

Or so LGT thought. Having pored over recent press reports about the data that was handed over to German tax authorities, LGT realized that Kieber had in fact kept copies. "We are sure as we can be that it was him," said the spokeswoman of the leak.

Having sent two more letters to Prince Hans-Adam, the last of which requested a pardon from his conviction for fraud, and was rejected, Kieber fled the country again in 2003. "LGT Group is not aware of HK's present whereabouts," LGT said Sunday. "According to reports in the media, he is living under a new identity in Australia."

Kieber seems rather sui generis. Nonetheless, this is a blow for tax havens like Liechtenstein, whose main industry is refusing to tell other countries what's going on in their banks. Tax evasion isn't only a bad idea on moral grounds--when you get caught, you end up paying a lot more than the original taxes in interest and fines. A 1% probability of having your secrets spilled to Uncle Sam decreases the expected value of a secret stash considerably. I'd bet that a lot of wealthy depositors at banks other than LGT are gulping hard and wondering if it's really worth it.

Still, I wonder if Germany and others shouldn't be careful what they wish for. People are more mobile than ever, especially rich ones; they may only succeed in chasing them out entirely, thereby losing all of their tax revenue, rather than just part.

Update Somewhat ironic that this comes just as the German high court decides to limit the government's power to spy on its citizens . . .