Criminal proceedings: BGH examines two »Cum

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Federal Court of Justice in Karlsruhe: "Largest tax robbery in German history"

Photo: Uli Deck / dpa

Investors, banks and stock market traders cheated the German tax authorities for billions of euros with cum-ex stock deals - just immoral, or did they make themselves a criminal offense?

Large-scale investigations and initial trials have long been ongoing, but the highest court ruling is still pending.

On Tuesday the first case reaches the highest criminal judge of the Federal Court of Justice (BGH) in Karlsruhe (Az. 1 StR 519/20).

Cum-ex transactions are so called because shares with (“cum”) and without (“ex”) dividend entitlements were moved back and forth in rapid succession around the cut-off date for the distribution.

The deliberately opaque transactions had only one goal: to create as much confusion as possible for the tax authorities.

With this trick, those involved could have capital gains tax refunded on a large scale, which was never paid.

The profits have been split.

This was made possible by a loophole in the law that was only closed in 2012.

Until then, the cum-ex business was booming.

Loophole closed in 2012

In the meantime, several public prosecutors and criminal courts are working on the complex cases.

The first judgment was made in March 2020 at the Bonn Regional Court in a trial against two London stock exchange traders.

Both had worked for the now liquidated financial consultancy Ballance, which played a central role in the Cum-Ex scandal.

The district court had sentenced one man to probation for tax evasion and the other for aiding and abetting.

The judges gave both of them credit for explaining business practices to the investigators in detail and thus initiating new proceedings.

The prosecution did not demand any higher penalties either: because the "greatest tax robbery in German history" was not committed by two people, but by hundreds.

The first man is also supposed to repay his share of the profits - 14 million euros.

He has appealed against this.

The second opposes his condemnation as a whole.

Both had protested that they had never thought they were doing anything criminal.

The BGH also has to decide whether the private bank MM Warburg involved in the scandal has to pay 176 million euros to the state treasury.

That was ordered by the district court.

The bank considers this to be unjustified.

In the meantime, she has paid the additional tax claims, but is taking legal action against the tax office's notices and the collection order from Bonn.

Originally, the Bonn trial was about four other banks.

However, due to the outbreak of the corona pandemic, the court had to shorten the process.

The complex was therefore split off.

The BGH is also negotiating the revision of the public prosecutor's office.

But it is only about details of the confiscation decision.

It is basically possible for the judges to announce a verdict right away, but it is unlikely given the complex matter.

mik / dpa