The suspect André E., 32, was arrested in the early hours of Thursday morning by the anti-terror unit GSG 9 in the eastern German state of Brandenburg.
He was later brought before a judge for his formal arraignment, where he was accused of helping produce the bizarre Pink Panther propaganda video made by the NSU to brag about xenophobic murders they committed. He's being charged with several serious crimes including sedition and inciting criminal acts.
"This piece of work mocks the victims of the group's terrorist crimes and shows an incredible amount of contempt for humanity," said head federal prosecutor Harald Range on Thursday.
André E was taken into custody in Potsdam, where he had apparently been hiding with his twin brother Maik, who wasn't arrested. But Maik is a known neo-Nazi who was was being monitored by authorities.
André E. comes from the small town of Johanngeorgenstadt in Saxony, and is said to have been in contact with the three NSU members killed or arrested in Zwickau just over two weeks ago.
Police found railway cards under the names of André E. and his wife Susann in the campervan where two NSU members, Uwe Böhnhardt and Uwe Mundlos, were killed on November 4. The Deutsche Bahn discount cards, paid for by André E., were reportedly used by Böhnhardt and Beate Zschäpe, the third member of the group who turned herself in on November 8.
Police also found flyers advertising André E.'s company Aemedig, which specialized in digitally altering videos, among the ruins of a flat apparently blown up by Zschäpe on the same day as the deaths of Böhnhardt and Mundlos.
This is being seen as evidence that André E. was at least partly responsible for the Pink Panther film. Investigators do not now believe that Mundlos, Böhnhardt and Zschäpe were directly involved in its production. “The three apparently didn't do it, according our current knowledge,” Interior Minister Hans-Peter Friedrich told Der Spiegel.
According to a prosecution statement, André E. is “strongly suspected to have supported the terrorist group the National Social Underground," and investigations suggest he has been in close contact with the NSU since 2003.
In another development, the head of Germany's domestic intelligence agency has admitted that documents have been destroyed that could help uncover the authorities' failure to stop the neo-Nazi terror cell from murdering at least 10 people.
Heinz Fromm, president of the federal Verfassungsschutz, recently told a parliamentary intelligence committee that many of the agency's files are by law destroyed after five years and only under special circumstances are they kept for 10 years, the daily Kölner Stadt-Anzeiger reported on Thursday.
"It would be nice if we still had all the files, but some of it is gone," Fromm said according to the paper.
This could make it extremely difficult to trace how the NSU continued operating after the neo-Nazi group's bomb-making operation was uncovered in 1998.
State and federal Verfassungsschutz offices were apparently unaware the NSU embarked on a xenophobic killing spree in 2000, shooting dead nine shopkeepers of Turkish and Greek descent over the following six years. They are also thought to have murdered a policewoman in 2007.
According to the Kölner Stadt-Anzeiger, the state intelligence office in the eastern state of Thuringia would have by law shredded information on Zschäpe, Böhnhardt and Mundlos after five years. A spokeswoman for the Thuringian Verfassungsschutz couldn't say if files still existed.
At least one bomb attack is also being attributed to the far-right extremist trio, who also carried out bank robberies to fund their lives in hiding based at a flat in Zwickau, Saxony.
The neo-Nazi terror ended earlier this month when Mundlos and Böhnhardt killed themselves in a caravan after being stopped by police. Zschäpe handed herself in to the police four days after allegedly blowing up the flat the three had shared. Several other people belonging to the far-right scene are suspected of helping them over the years.