Schmid accused of tax evasion and breach of trust

BERLIN — More than a year after jailing Andreas Schmid out of concern that he would flee the country, Munich prosecutors on Tuesday officially charged the producer and former fund manager with tax evasion and breach of trust.

As head of VIP Medienfonds — until last year one of Germany’s biggest film funds — Schmid financed a slew of Hollywood and European films, including “Alpha Dog,” “Perfume: The Story of a Murderer,” “Black Book” and the upcoming “Trade,” with money raised from German investors.

Having wrapped up their 14-month investigation, prosecutors allege Schmid and his company deceived clients by assuring them that their investments were guaranteed and tax-deductible. In order to secure bank guarantees for the investments, prosecutors charge, VIP placed up to 80% of invested funds with banks while using only 20% directly for film production.

For most fund investors, usually high-tax-bracket professionals looking to keep their income tax as low as possible, the fund’s tax writeoff was the main incentive, and the investment guarantee made the deal even more attractive.

According to German law at the time, however, only investments that went directly to production were tax-deductible. Since most of the money went into banks to secure investment guarantees, VIP investors are facing the sobering prospect of having to pay back up to E270 million ($357 million) if prosecutors win their case.

Eager to plug tax loopholes that were costing the country billions, the German government last year eliminated tax havens of all kinds.

Schmid, who could go to trial as early as January, was one of the film fund industry’s flashiest reps and an outspoken critic of government plans to shut down film funds. His arrest and incarceration were widely seen by the industry as a government show of force. The demonstration of resolve left jittery fund operators with no stomach for a fight.

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