Cum-Ex: indictment against six bankers and top lawyer – business

Maple Bank managers experienced a golden age in the year of the financial crisis. At the time, things were different in the office corridors in Frankfurt’s Westend than in the neighboring bank towers. There was no significant banking business in the traditional sense, no lending to companies, no major investment banking on behalf of customers. You didn’t even wear ties here. In 2008, the largely unknown institution was largely spared the shocks on the international financial markets. Because it mainly consisted of two sources of income: one was complex transactions with the Volkswagen share on behalf of Porsche. At that time, the Stuttgart company tried to take over the much larger VW group.

The other source of money was a form of stock trading around the dividend date that may have been criminal. In these deals, the bank’s return came solely from Frankfurt tax offices. Maple Bank is said to have collected more than 388 million euros from the Treasury within four years by having unpaid capital gains tax. So it is in the indictment of the General Prosecutor’s Office in Frankfurt on 4 December 2019.

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It is the third serious charge tax evasion in connection with cum-ex transactions, according to the parties involved, it is a particularly glaring case. And in this case, investigators have for the first time quantified to what extent those involved should have personally benefited from the business at the expense of the tax authorities: the Maple bankers accused of receiving an estimated total of at least 29.5 million euros as bonuses.

One of the accused is said to have collected almost twelve million euros

Six of the bank’s former employees, including former boss Wolfgang Schuck, and former partner of the Freshfields business law firm, Ulf Johannemann, are accused as tax advisors to the institute. The Attorney General’s Office accuses them of serious tax evasion from 2006 to 2009; they should tell the tax authorities when trading shares with (cum) and without (ex) dividend deliberately fooled. Schuck and another accused named H. have been in custody since mid-December because of the risk of escape. In the case of Johannemann, the regional court in Frankfurt suspended the custody before Christmas subject to conditions. The former head of tax at the Freshfields law firm had said in a testimony with the investigators that he had been deceived by the Maple Bank. Johannemann’s defense lawyer does not comment on the matter, Schuck’s defense lawyer and H.’s defense lawyer declined to comment. A spokesman for the Prosecutor General’s Office said nothing.

Ex-bank boss Schuck alone is said to have received at least 8.39 million euros through the cum-ex transactions, another manager, the then head of the bank’s trading department, even almost twelve million euros. In contrast, the slightly more than 1.3 million euros that Johannemann is said to have charged for Freshfields by 2009, still appear modest. He later allegedly helped with a tax audit to deceive the tax authorities about the true nature of the bank’s business, and estimated another 1.12 million euros for his advice. Such sums were insignificant for the international law firm. However, the consequences today are severe: Freshfields is listed as a minority party in the indictment, meaning that he would be in court in a lawsuit. The corporate law firm faces a fine of millions, the reputation damage is immense. A spokesman did not want to comment on the processes with reference to the ongoing proceedings. Johannemann left the firm at his own request in autumn.

Was the business legally clean? There were doubts right from the start

The Economic Criminal Court at the Frankfurt Regional Court must now decide whether to allow the indictment. If there is a trial, there will be a lot to talk about on April 26, 2006. On this day, three of the accused, a former ex-banker and Johannemann who had since passed away, discussed the trading strategy for the year together: The Maple Bank was supposed to have subsidiaries with Foreign shares of German corporations always trade around the dividend payday. Put simply, the bank is said to have issued tax certificates for unpaid taxes. The following year, she claimed the certified amounts from the tax office. In the years thereafter, she is said to have refined the strategy and adjusted it so that it was still possible to offset unpaid taxes. Johannemann accompanied this from 2006 onwards with several reports that the business was legally in order.

There were doubts right from the start. On the evening of April 26, 2006, a senior manager of the bank in London summarized the contents of a conference call by email: The strategy made him uncomfortable, he wrote, because it looked as if Maple Bank was fraudulently demanding taxes back. Johannemann, the accusation alleges, has dispelled these concerns and referred to a report still to be written. Already in this, but also in all other reports, the investigators accuse him of intentionally making incorrect assumptions in order to arrive at the desired result.

His influence was evident. The shops were approved on the same April day. Initially, the sums were comparatively manageable: the bank is said to have claimed almost 39 million euros in capital gains tax and solidarity surcharge for 2006. The following year it was more than 102 million euros. The really big money blessing came with the corporate tax notice in August 2009. For the crisis year 2008, the tax office in Frankfurt-Höchst paid almost 190 million euros to the tiny money house. While banks were supported with tax money elsewhere, a few employees of a little-known institution at the treasury are said to have enriched themselves and thus earned as much as only high-ranking investment bankers at major banks. The Maple Bank later collapsed under the Treasury’s claims; Freshfields paid 50 million euros last summer in a settlement with the bankruptcy trustee.

In civil law terms, the case already has a lot to offer. It will soon be clear whether the actions of those involved were also punishable. Because of the pre-trial detention, the procedure is treated particularly urgently.

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