KOHL SCANDAL: Europe's old master admits he ran secret slush funds

Suitcase of cash given to arms dealer by senior party officials reveals existence of covert fund operated by former Chancellor

GERMANY WAS plunged into its gravest political scandal for a decade yesterday, when Helmut Kohl admitted he had kept secret party bank accounts during his reign as Chancellor.

Reading a curt statement after a stormy session of his party's presidium, Mr Kohl denied taking bribes, though he refused to divulge the origin and amount of money involved. "I reject in the strongest terms all the allegations... that political decisions made by me could be bought."

Wolfgang Schauble, the current chairman of the Christian Democrat Union, said the last secret account was closed a year ago. He could not say how much money had thus been hidden or where it had come from. Public prosecutors are investigating a DM1m donation in 1991 from an arms manufacturer to the party, which never turned up in the CDU's audited accounts.

Mr Kohl confirmed that some donations had been diverted into secret accounts, and subsequently doled out to local party organisations at his whim. Mr Schauble, who had been the former chancellor's deputy, says even he did not know about these transactions.

It has never been suggested that Mr Kohl, the longest-serving German Chancellor this century, had financially benefited from his irregular book-keeping. But the scandal over the missing DM1m donation and slush fund allegations has raised questions about who is giving money secretly to German politicians, and for what motives.

Despite assurances that the German government was not for sale, the suspicion lingers that some companies made under-the-counter donations in the hope of influencing policy. According to prosecutors, the missing DM1m came from a firm that needed government approval to sell armoured vehicles to Saudi Arabia.

Mr Kohl, 69, remains one of the CDU's most popular politician and its honourary chairman. "We are proud of Helmut Kohl," Mr Schauble declared yesterday. Mr Kohl filled every television screen two weeks ago as he traced his footsteps, in the company of that other Cold War peace-maker, Mikhail Gorbachev, along the Wall they had destroyed. But yesterday, he could not wait to get out of Berlin.

Suddenly, the capital he had helped to restore to its grandeur seemed stifling. He had, he explained, a pressing engagement in Lubeck, the Baltic port where regional elections are due in but two fleeting months. No time to answer journalists' questions, or attend the meeting of the parliamentary party. Not a moment to spare for his fellow MPs.

Maybe he just could not look them in the eye. His allure has faded in the light of that blazing electoral defeat a year ago, but to most Christian Democrats his name still stood for glory, decency and integrity. Say what you like about that Helmut Kohl - and many did - but his place in the history books was already assured.

He had united Germany, kept it peaceful and prosperous, and locked this restless behemoth of a country firmly into a European Union where national conflict is settled by cheque books, not violence. For 16 years he reigned, longer than all but Bismarck.

And now we discover that he has been cheating all along, stashing party funds in secret bank accounts, rewarding loyalty with cash. Or buying loyalty, whichever way one wants to look at it. Mr Kohl was chairman of the Christian Democrat Union for 25 years. For how long the "book-keeping manoeuvres" - as Mr Schauble described the diversion of funds - have been going on, Mr Kohl will not say.

All we have is one money-trail, and the strong suspicion that there were others. In his final years as Chancellor, Mr Kohl reported not a single major donation to his party. His colleagues say it is unlikely he received none.

The trail we do have starts at a shopping centre car park in Switzerland. It is there that on a sunny afternoon in 1991 three men met, and a suitcase containing DM1m was exchanged. The donor was Karlheinz Schreiber, an arms dealer currently facing extradition from Canada on charges of tax evasion and fraud. The two men who took the suitcase were Walther Leisler Kiep, the party's national treasurer at the time, and Horst Weyrauch, its accountant.

Some people suspect complicity among his party colleagues; There were personal accounts for members of the CDU presidium. Mr Schauble admitted to being vaguely aware of one in his name but said he had not questioned its origin or purpose. "I found the account uninteresting," he said. It contained only DM11,000.

No one is suggesting that the former chancellor had his hand in the till. Money destined for the party went to the party, though sometimes through a meandering route. "Helmut Kohl led the party in a patriarchal way," Mr Schauble explained. "This patriarchal style meant that the rules were not adhered to exactly in the way we might want today."

The scandal is set to accelerate the long overdue generational change in the CDU, allowing the forty-something "young wild ones" to take centre stage. Or it might benefit Edmund Stoiber, Bavaria's Euro-sceptic Prime Minister. Either way, the party is likely take a turn to the right.

KOHL STATEMENT

An extract from the statement given by Helmut Kohl yesterday

"DURING MY term as party chairman I considered it necessary to treat certain matters secretly, such as special payments to party branches and organisations, for example as crucial assistance in the financing of their political work.

"Running accounts separately from the normal accounts of the party treasury seemed to me to be appropriate. In doing so, I always had complete confidence in Weyrauch & Kapp GmbH [an accounting firm that was responsible for handling donations to the party].

"I would add that personal confidence has, throughout my political life, been more important than purely formal scrutiny.

"If the consequence of this action was a lack of transparency and, perhaps, violations of rules on party financing, then I regret that. I did not want this, I wanted to serve my party.

"Bearing in mind the current public debate, it is important to prevent my party suffering damage. I say this with regard to my party, its nearly 640,000 members and the new party leadership. Therefore it is important for me to take political responsibility for the mistakes made during my term of office.

"I reject in the strongest terms all allegations - in whatever form - that political decisions made by me could be bought. Anyone who knows me knows that the only responsibility I felt - and still feel - was towards the good of our country."