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Federal Court of Justice in Karlsruhe
Photo: Uli Deck / dpa
For years it was a lucrative business, with which banks and resourceful investors had billions in taxes reimbursed that had not been paid before. Now the Federal Court of Justice has decided: That was a criminal offense. In the first ruling by the highest court (AZ: 1 StR 519/20) the judges in Karlsruhe came to the conclusion that the cum-ex transactions were criminal tax evasion. According to the BGH, profits from the business can also be collected.
The verdict is trend-setting, because numerous cum-ex cases are still preoccupying the judiciary. Defense lawyers had argued that the dealings were not punishable because of a loophole in the law. The BGH assessed this as wrong. The defendants acted willfully and only conducted the business in order to induce the tax authorities to issue tax refunds. It was a matter of willful tax evasion. The Senate rejected the argument that there was a loophole in the law. "There was no gap here," said the presiding judge, Rolf Raum. The acts that were committed by the defendants between 2007 and 2011 are also not statute-barred.
In March 2020, the Bonn Regional Court sentenced the two British stock traders Markus S. and Nicholas D. to suspended sentences in the first nationwide cum-ex criminal case.
The fact that they had testified in the process and contributed significantly to the clarification, the court assessed as mitigating the sentence.
The district court also ordered the confiscation of the profits from illegal transactions.
The Hamburg private bank MM Warburg had to repay € 176 million cum-ex-booty, the defendant S. was sentenced to pay € 14 million.
The defendants and the Warburg Bank, however, had appealed to the BGH, which was now unsuccessful.
Total damage of at least 7.2 billion euros
In cum-ex transactions, investors exchanged shares in circles over the dividend date in such a way that the tax authorities lost track - and accidentally reimbursed the withholding tax withheld several times. According to estimates by the Mannheim tax professor
Christoph Spengel
, the taxpayers
suffered
total damage of at least 7.2 billion euros between 2005 and 2011 in
the largest tax robbery in German post-war history
.
Almost all of the large banks were involved in cum-ex transactions, but in the opinion of lawyers the situation is as clear as in the case of the Hamburg Warburg Bank (you can find out more about the case here). That is why the judiciary in North Rhine-Westphalia is initially concentrating on the Hamburg private bank. The first cum-ex criminal case in Bonn last year concerned the business of the Warburg Bank, and two British stock traders were convicted. This judgment is now final.
In June, in a second trial, a former bank employee was sentenced to five years and six months in prison for doing business.
He has also appealed on a point of law.
The condemned former general agent of the bank was considered the right-hand man of bank co-owner
Christian Olearius
(79).
Charges against the former bank boss are expected later this year.
He denies the allegations.
Warburg owner disappointed with the verdict
In
an initial reaction,
Olearius and his co-partner
Max Warburg
(72) were disappointed with the decision from Karlsruhe. The bank has never had a fair chance to present its position, they said, will be made a scapegoat. Warburg claims to have earned a total of 68 million euros from cum-ex deals between 2007 and 2011, but today declares that he did not see through at the time that something illegal was going on in the dealings. The bank did not intend to benefit from improperly refunded taxes. "We will therefore have to examine whether we now have to seek our rights on the constitutional and human rights level," write Olearius and Warburg in their declaration.
The ruling did not have any direct financial impact on the bank, writes the bank in a statement.
After the first judgment last year, the bank had transferred the millions to the tax office as a precaution.
The bank had fully processed the economic consequences of the cum-ex transactions with the last annual financial statements, it said.
After submitting the reasons for the judgment, the judgment will be examined.
Pleased reactions from politics
There were positive reactions from politics.
Florian Toncar, the financial policy spokesman for the FDP parliamentary group, called on the tax authorities after the verdict to get back the stolen money without restriction.
"That must now be pursued with all vigor," he told the "Rheinische Post".
The deputy leader of the left-wing parliamentary group in the Bundestag, Fabio De Masi, spoke to the newspaper of a "slap in the face for Finance Minister Olaf Scholz" (SPD), who, as Mayor of Hamburg, has repeatedly dealt with a Warburg banker - who is being prosecuted in another case had met.
Christian Görke, the top candidate of the Left Party in Brandenburg for the federal election, also welcomed the verdict.
"Anyone who cheats worth millions should be punished," he said.
The association "Bürgerbewegung Finanzwende" spoke of a "good day in the fight against financial crime".
It is "good that the BGH is sending a clear signal here, because all too often one gets the impression in Germany that financial crime is being taken lightly".
oho / rtr / dpa / afp