On the scent: Prosecutor probes 'Perfume' books

VIP's Schmid investigation's target

Accusations of creative accounting are clinging to Tom Tyk-wer's new film "Perfume: The Story of a Murderer."

The film, which stars Ben Whishaw, Dustin Hoffman and Alan Rickman, has been a huge hit in Germany, earning some €32 million ($40 million) in its first five weeks in release.

But an ongoing investigation by the Munich state prosecutor's office targeting one of the film's backers, Andreas Schmid, has revealed potential irregularities in the financing of the picture, according to reports.

According to documents Schmid filed to tax authorities in 2005, his film fund VIP invested €25 million ($31.5 million) in "Perfume," or about half of the total budget. But according to Constantin's ledgers, VIP only put up €4.1 million ($5.2 million) toward the movie.

On the basis of Constantin's €4.1 million figure, "Perfume" received state subsidies to complete the film's financing, including €700,000 ($882,300) in funds from the NRW film board.

If VIP put €25 million instead of just €4.1 million into "Perfume," the film would have been fully financed before it applied for state subsidies and would have been ineligible for state support.

A report Thursday in German daily Sueddeutsche Zeitung claims Constantin sent a letter to the NRW film board in June 2005 explaining the discrepancy.

The newspaper quotes the letter as saying that VIP put only €4.1 million into "Perfume." The remaining VIP investment of more than €20 million was parked in a bank account to be used to pay back VIP investors in yearly installments marked as their share of "Perfume" revenue.

Investors were given a guaranteed return on 80% of their investment, even though only 20% of the capital was used for the risky business of actual production.

Because VIP claimed the whole €25 million was used to produce the film, its investors were able to write off their entire contribution against tax.

State prosecutors in Munich have accused Schmid and VIP of systematically using this kind of bait-and-switch to cheat the German tax man.

In total, VIP is accused of cheating the German finance department of as much as €275 million ($346.5 million).

Schmid was arrested last year and remains in jail awaiting trial. His lawyers blame the production companies for the deception.

Constantin Film denies any wrongdoing and insists the budgets for "Perfume" are all above board. The Munich state prosecutor's office has not accused Constantin of any illegality.