According to a report in Wednesday's Süddeutsche Zeitung newspaper, the city council is alleged to have sold off over 400 properties after reunification, without making adequate efforts to track down potential owners.
According to the report, the properties would be officially designated as having no owners, and then sold to interested bidders via a legal proxy; the paper claims the process of so-called "cold expropriation" dates back to the mid-1990s.
But numerous irregularities are now beginning to emerge. The Süddeutsche reports that not only were many of the properties still privately owned, but also that the legal proxy and the eventual buyer would often be one and the same person.
Properties were also sometimes sold as much as three times over to generate maximum income.
That income totalled around €6.3 million – and ended up in a municipal deposit account, under the name "herrenlose Häuser" ("abandoned houses"). City officials have in recent weeks made some efforts to trace the proprietors to whom this money rightfully belongs, but with little success.
"Hardly anyone has come forward," city spokesman Matthias Hasberg told the paper, and many are likely to have died in the intervening period.
The scandal threatens to re-awaken the notorious Sachsensumpf ("Saxon swamp") affair that scandalized the city in the late 1990s and early 2000s, where high-ranking politicians, judges and civil servants were alleged to have connections with organised crime and child prostitution rings.
An investigative process is now under way into the new scandal: the issue was debated in the city council last week, and some politicians have demanded the names of participants in the transactions.
Amid speculation that the new scandal could embroil many of the same people implicated in the Sachsensumpf affair, attention has turned to the city's legal office, heavily involved in the first case.
The state parliament is considering a dissolution of the office, but state prosecutors say the office's female director and two colleagues have already been placed on leave.
Leipzig Mayor Burkhard Jung has so far flatly denied any knowledge of the sales.
His predecessor Andreas Müller has been the department head responsible for the controversial legal office since 1994 – in other words since the start of the irregular sales. He has also disavowed any knowledge of the transactions.
The Süddeutsche points out that Müller told the city council last week he had read all the audit office reports during his tenure – yet it was the audit office that first drew attention to the irregularities in 1999.