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One of the two defendants (lr, hidden), a former top tax lawyer, Martin cube and Werner Leitner, lawyer.
© Andreas Arnold/dpa Pool/dpa
When it came to cum-ex stock deals, many banks relied on the assessment of lawyers as a kind of free pass.
Now, for the first time, a tax lawyer has been convicted because of his advice.
This brings the investigation into the tax scandal to a new level.
Frankfurt/Main - In the billion-dollar tax scandal surrounding cum-ex share transactions, a former top lawyer has to go to prison.
On Tuesday, the Frankfurt regional court sentenced a former tax lawyer from the law firm Freshfields Bruckhaus Deringer to three and a half years in prison for aiding and abetting serious tax evasion in four cases.
This was the first time that a tax lawyer from a large law firm was prosecuted criminally for his legal advice on cum-ex transactions.
From 2006 onwards, the lawyer had advised the now insolvent Maple Bank on cum-ex deals with reports.
He took a central position and was responsible for the necessary structures from the start, said presiding judge Werner Gröschel in justifying the verdict.
In doing so, he caused a “ludicrously high tax loss” and showed “very considerable criminal energy”.
A co-defendant ex-Maple banker was also sentenced to a suspended sentence of two years for tax evasion.
His assets amounting to a good 1.9 million euros are skimmed off.
He had already made a confession at the start of the trial and described the cum-ex deals as “too good to be true”.
The judgment can be appealed.
Reports gave Cum-Ex a hint of legality
In cum-ex deals, which peaked between 2006 and 2011, banks and other investors took advantage of a loophole in the law.
With the help of banks, they had capital gains tax paid on dividends reimbursed several times over.
To this end, shares with and without dividend entitlement were moved back and forth between those involved around the dividend record date.
In the end, tax offices refunded taxes that had not even been paid.
Cum-Ex is considered the largest tax scandal in the Federal Republic, with tax damage estimated at at least ten billion euros.
Numerous banks are involved in the scandal.
For a long time it was unclear whether cum-ex deals were illegal.
The tax loophole was only closed in 2012.
In 2021, the Federal Court of Justice decided that the transactions should be viewed as tax evasion.
When assessing cum-ex deals, many banks previously relied on reports from law firms such as Freshfields as a kind of free pass.
According to the Frankfurt Public Prosecutor's Office, in this specific case it was a matter of "courtesy reports" that gave the transactions a legal appearance.
In addition, the former top lawyer gave the tax authorities false information.
“We would not have carried out the transactions without the reports,” the convicted Maple banker testified in the trial.
Tax damage of 388 million euros
Judge Gröschel said there were certainly concerns on Maple Bank's part about the transactions that went under the name “German Pair Strategy”.
There was talk of an “intuitive, fraudulent” system, but according to the legal assessment of the former Freshfields lawyer, Maple Bank agreed to the deals.
The bank with Canadian roots had turned a big wheel with Cum-Ex and, according to the indictment, caused tax damage of 388 million euros - until it went bankrupt in 2016 because of the threat of over-indebtedness due to a tax provision for Cum-Ex.
As early as November 2022, four former Maple bankers, including the ex-German boss, were sentenced to lengthy prison sentences at the Frankfurt Regional Court.
The proceedings against the former Freshfields tax lawyer and other bankers were separated.
The former top lawyer, who watched the verdict with a concerned expression, did not comment on Tuesday.
He had made a late confession, which, according to Gröschel, was taken into account to a limited extent in the sentence.
Back then, as a young aspiring lawyer, he acted with a “certain naivety”.
With the verdict, the court fell short of the demands of the public prosecutor's office, which had pleaded for five and a half years in prison.
Many major banks on Freshfields' customer list
Freshfields not only advised Maple Bank on Cum-Ex.
The major law firm's client list included many big names in the financial world.
During the investigation, the law firm itself came into the sights of the investigators.
Starting in 2017, they searched Freshfields' offices in Frankfurt.
The insolvency administrator of Maple Bank sued the firm for 95 million euros, and in the end there was a settlement for 50 million.
Freshfields later admitted that the advice on Cum-Ex was not a claim to glory.
They were made years ago.
Gerhard Schick, board member of the citizens' movement Finanzwende, spoke of an important judgment.
The clear message to lawyers “who are working on the next tax tricks today” is “that this state is not defenseless and that you can end up in prison if you help to rob the state and thus all of us.”
The judgment has a professional signal effect.
“Not only those who carried out the financial transactions themselves are criminally responsible, but also those who worked on the fraudulent transactions as legal advisors.” dpa