Kirch Group Chief Is Subject of Tax Probe

Leo Kirch, head of German media company Kirch Group, is being investigated on suspicion of hiding “billions” of marks in profit from German tax authorities, German and Swiss prosecutors said Monday.

The Munich prosecutor’s office said it asked Swiss prosecutors to help with its 21-month-old probe into whether the head of Germany’s second-biggest broadcasting company avoided paying up to the equivalent of $220 million in taxes, according to news reports. Swiss authorities said they searched about a dozen homes and offices last week as part of the investigation, which involves a 1990 business transaction.

The probe is likely to renew speculation about the state of Kirch Group’s finances, which many media experts believe have been under pressure because of problems with the company’s DF-1 digital TV venture. Still, because the privately held company rarely publishes financial information, it’s difficult to assess the impact any penalties could have, analysts said.

“This can’t help matters, but given the lack of reliable information, it’s tough to draw conclusions,” said Petra Heist, an analyst at Bayerische Vereinsbank in Munich.

Zurich Dist. Atty. Dieter Jann said German officials are investigating whether the 70-year-old Kirch used MH Medien-Handels, a company owned by business partner Otto Beisheim, to hide profit “in the billions” of marks from German tax authorities. Beisheim is one of the investors in Metro Holding, German retailer Metro’s majority shareholder.

According to Swiss newspaper reports, Medien-Handels bought the rights to 2,500 movies from Kirch in 1990 for about $275 million. A few months later, the Swiss company sold the rights to Kirch-owned broadcasters Sat1 and ProSieben for about $900 million, though the films never left Kirch’s storage houses near Munich, the papers said.

Kirch spokesman Johannes Schmitz said the media company wouldn’t comment on an “ongoing procedure.”