August 3, 2009 / 1:41 PM / in 8 years

Arms dealer with CDU ties deported to Germany

BERLIN (Reuters) - A German-Canadian arms dealer and key figure in a funding scandal which badly damaged Chancellor Angela Merkel’s conservatives a decade ago arrived in Munich from Canada on Monday to face tax evasion and fraud charges.

<p>German-Canadian arms dealer Karlheinz Schreiber arrives at the prison in the Bavarian town of Augsburg, August 3, 2009. REUTERS/Alexandra Beier</p>

The arrival of Karlheinz Schreiber, 75, could be a headache for Merkel’s Christian Democrats (CDU) before next month’s election as it will rake up past allegations over party slush funds which disgraced former Chancellor Helmut Kohl.

Schreiber, who has been fighting his extradition since he was arrested in Canada about 10 years ago, is wanted by prosecutors in Augsburg for tax evasion, fraud and bribery.

A former junior defense minister was found guilty in 2005 of corruption after saying he received 2 million euros ($2.85 million) for deals involving Schreiber, who sold armored vehicles to Saudi Arabia.

A spokesman for the Augsburg court said Schreiber would be read his arrest warrant, which originated from September 1999, within 24 hours but it was unclear when his trial would start.

Analysts say whilst a looming trial will cast a shadow over the CDU, it is unlikely to damage Merkel personally as she was careful to distance herself from Kohl after the scandal broke.

However, Interior Minister Wolfgang Schaeuble was forced to resign as CDU chairman over the scandal in 2000 and Kohl was forced to quit as honorary president after admitting accepting illegal party donations.

Some lawmakers in the Social Democrats (SPD), who have shared power with Merkel’s conservatives since 2005 in an awkward coalition but will fight them in the election, said the affair could affect the September 27 vote.

“Some conservatives will be really worried about this. It is not for nothing that prosecutors have been going after him all this time,” said Franz Maget, a senior Bavarian SPD politician.

The SPD is trailing in opinion polls which show Merkel’s conservatives could win enough support to form a coalition with their desired partners, the pro-business Free Democrats (FDP).

Canada’s government had agreed in 2008 to allow Schreiber to stay in Canada until he testified at a public inquiry into cash payments he made to former Prime Minister Brian Mulroney.

That inquiry held its final hearing in Ottawa last Tuesday, and is expected to issue its report by the end of the year.

Mulroney has denied any wrongdoing or ethical violations. (Additional reporting by Peter Maushagen in Munich and Frank McGurty in Toronto; Editing by Sonya Hepinstall)

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