2 Leaders of Former East German Communist Party Arrested : Scandal: They are accused of embezzlement in the transfer of $71 million to Moscow to hide party riches.

Two top officials from the restructured East German Communist Party were arrested Friday after admitting they secretly transferred 107 million marks ($71 million) to Moscow in an attempt to hide party riches from the newly united German government.

Wolfgang Pohl, vice chairman and treasurer of the party, now known as the Party of Democratic Socialism, admitted his guilt and resigned hours before Berlin police arrested him along with party finance director Wolfgang Langnitschke.

Both were accused of embezzlement.

Coming to light just five weeks before national elections in Germany, the scandal threatens to destroy the reformist party, which emerged from the ruins of the powerful Stalinist regime that ruled East Germany for 40 years.

The party, which claims about 350,000 members among 12 million German voters in the east, represents itself as an opposition voice in united Germany. The current, mostly young leadership has attempted to disassociate itself from the corrupt regime that was toppled in a bloodless revolution last fall.

Party Chairman Gregor Gysi, who also is a deputy of the Bundestag, or lower house of Parliament, was expected to offer his resignation today.

Pohl issued a statement before his arrest saying that his sole motive was “to help the party” by protecting funds from possible confiscation by the government task force investigating vast property and financial holdings of the East German Communists.

It was not immediately disclosed whether the transfer took place before or after the two Germanys merged Oct. 3.

The usually feisty Gysi was clearly distraught as he faced reporters after the embarrassing revelations.

“The transaction was undertaken . . . without the knowledge and without the approval of the party presidium and chairman,” Gysi said. “We have ruled out any motive of personal enrichment on the part of both these comrades.”

The scandal was exposed last week when about 80 plainclothes police raided party headquarters in Berlin without a search warrant, raising sharp protests by the party that it was being politically persecuted.

When authorities announced that the party was under suspicion of embezzling millions through a phony Soviet firm and through bank accounts in Norway and the Netherlands, Gysi heatedly insisted the transactions were legitimate.

He contended that the funds were transferred to honor a commitment to sponsor students in the Soviet Union.

After an emergency visit to Moscow on Thursday, Gysi returned to Germany and told investigators he had learned otherwise, authorities said.

The party’s holdings, reported last June to be worth 3.1 billion marks ($2 billion), are under control of a government trustee agency. Officials said the law was broken when the party failed to seek permission for the transfer.

The Soviet Communist Party on Friday denied any knowledge of the German party’s illegal transactions, according to the Tass news agency.

Mainstream political rivals were quick to attack the Democratic Socialists, who hold a handful of seats in the Bundestag, and had been expected to secure enough votes Dec. 2 to win representation in the first elected pan-German government since the Third Reich.

Democratic Socialists are a party “with a terrible past and a corrupt present as well,” said Volker Ruehe, general secretary of Chancellor Helmut Kohl’s conservative Christian Democrats.