Cum-ex: UK banker fined €14m in tax fraud case
March 19, 2020
Two British bankers were found guilty of tax evasion and handed suspended prison sentences on Wednesday, in Germany's biggest post-war fraud trial.
The court in the western German city of Bonn also fined one of the men €14 million ($15.2 million) for his role in the scheme.
The so-called "cum-ex" scandal saw the bankers employ multi-billion-euro trades to file bogus tax reclaims and scam the state between 2005 and 2011. They particularly profited in the wake of the 2008/2009 financial crash.
Judge Roland Zickler called the case a "collective case of thievery from state coffers." The conviction was the first criminal conviction in the case, following a trial that has rolled on for many months — but which was fast-tracked due to the current coronavirus outbreak.
State prosecutor Anne Brorhilker provided the court with evidence showing that the two men — Martin S. and Nicholas D. — had filed double tax reclaims on more than 30 occasions, using a network of accomplices. The reclaims amounted to more than €447 million ($486 million).
"I have made mistakes," Martin S. told the court. "I have learned my lesson."
What is a 'cum-ex' scheme?
A "cum-ex" scheme, also known as dividend stripping, is a tax avoidance scheme. The two UK bankers organized sham share trades to claim tax rebates twice. In the scheme, investors rely on the sale of borrowed shares right before an investor is required to pay dividends.
The technical legalities around the trial have led to the case being branded "the most complicated" tax fraud case in history. The conviction of the two bankers may be used as a precedent in similar trials, with such tax arrangements often toeing the line between legal loopholes and illegal activity.
The €14 million which Martin S. has been ordered to pay only makes up only a small proportion of the over €400 million which the two men amassed through their dealing. Authorities doubt whether they will ever be able to recover the rest of the money.
Although the money may never be recovered, prosecutors hope to use the case as part of a wider effort to uncover similar cases.
ed/rs (dpa, Reuters)