FBI Arrests Volkswagen Fraud Suspect

Accompanied by West German police, FBI agents went to a Hollywood apartment Wednesday night and arrested a man sought since March in a currency exchange fraud that allegedly cost the Volkswagen auto firm more than $275 million.

Joachim Schmidt, 38, who was a currency exchange broker in Frankfurt, West Germany, had a “substantial” sum of money with him when arrested on a fugitive warrant at 1791 N. Sycamore Ave., the FBI said.

West German federal police, who formed a special team in June to hunt for Schmidt, said their agents tracked him through Switzerland, several southern European countries and the Caribbean. They said he fled West Germany in a Volkswagen-owned airplane the day the fraud was announced in March.

Forgery Alleged

Neither the police nor the FBI would say how the fugitive was traced to the apartment where he was arrested. However, police announced in West Germany that Schmidt was staying there under the name of a Swiss friend and denied at first that he was Schmidt. He did not resist arrest.

In announcing the arrest here, the FBI did not mention the unusual circumstance that members of the West German special police team had accompanied the FBI agents. However, an FBI spokesman confirmed it after being told of the West German press release saying that German agents “stood with their American FBI colleagues in front of the door of the apartment.”

Federal police and prosecutors in the state of Lower Saxony, where Volkswagen is based, said Schmidt and several Volkswagen employees faked foreign exchange futures contracts in the company’s name. Large international companies use such contracts to hedge, or protect themselves, against currency fluctuations.

Schmidt is suspected of putting illegal profits in bank accounts in Switzerland and Liechtenstein, the police said.

Schmidt is expected to be returned for trial to West Germany. Authorities there said in September that Burkhard Junger, fired in March as Volkswagen’s chief currency trader and arrested in April, had confessed to masterminding the scheme with Schmidt. Two of Junger’s former staff were arrested in June and August.

The swindle came to light when the National Bank of Hungary refused to honor contracts to buy currency from Volkswagen at a specific dates and values. The bank alleged that the contracts were forged, causing it to lose money when the dollar fell in value.