It is considered one of the biggest tax scandals in post-war German history: investors cheated the tax authorities for years with cum-ex stock transactions. Now a man is to answer in court, who is considered the driving force.
In the multi-billion dollar cum-ex stock transaction scandal, the most prominent figure in Germany is on trial.
Hanno Berger, who is considered the architect of the deals at the expense of the state treasury, is to answer before the Bonn Regional Court after his extradition from Switzerland from April 4th. Eight days later, on April 12, the Wiesbaden district court wants to start a trial on suspicion of tax evasion against the 71-year-old. For Berger, this ended a year-long escape from German justice.
Berger, who once controlled banks as a tax officer in Hesse, later switched sides and became self-employed as a tax lawyer serving banks and the wealthy. He is seen as the driving force behind the cum-ex business in Germany, in which numerous financial institutions cheated the state by an estimated double-digit billion amount. “Mr. Cum-Ex” advised banks and rich private investors on the construction of stock deals.
In “Cum-Ex” transactions, banks and other financial players used a loophole in the law at the time. Around the dividend record date, shares with («cum») and without («ex») dividend rights were pushed back and forth between several participants. At the end of the confusion, tax offices reimbursed capital gains taxes that had not been paid at all. In 2012 the tax loophole was closed. In the summer of 2021, the Federal Court of Justice then made it clear that cum-ex transactions are to be assessed as tax evasion and are therefore punishable.
Accusation of particularly serious tax evasion
Berger is accused of particularly serious tax evasion in three cases from 2007 to 2013 before the Bonn district court. The accused is said to have persuaded a private bank to take up cum-ex transactions and helped set up the necessary structures. He is also said to have attracted bona fide investors. The Treasury is said to have suffered damage of 278 million euros, and Berger also benefited from it.
In the Wiesbaden trial, the Frankfurt Attorney General accused Berger of having obtained false certificates for a good 113 million euros in unpaid taxes between 2006 and 2008. Dax shares with a volume of 15.8 billion euros were traded with other defendants via a complex system. The trials against Berger could take months. The Wiesbaden district court, for example, has scheduled hearings until July.
Berger fled to Switzerland in autumn 2012 after his office in Frankfurt was searched – the Higher Regional Court in Frankfurt saw this as an escape. From his exile in a mountain village, Berger rejected the allegations against him and saw himself as the victim of a judicial scandal. When a cum-ex process began in Wiesbaden in March 2021, Berger stayed away. He was unable to stand trial, his lawyers said, with a view to his health. He had done “nothing wrong” and was prejudiced, he later said in an interview with the business magazine Capital.
To the end, Berger resisted his extradition to Germany, which the judiciary in Hesse and North Rhine-Westphalia had requested. After being arrested in the canton of Graubünden, he has been in extradition custody since mid-2021. Berger resisted in all legal instances, but in the end the Swiss Federal Office of Justice approved the extradition. At the end of February, the Swiss police handed Berger over to officials from the Federal Criminal Police Office in Konstanz.
There is a risk of up to ten years imprisonment
Berger is only one, but probably the most prominent of many involved in the cum-ex scandal. The public prosecutor’s office in Frankfurt described him as the “Spiritus Rector” of stock deals. He now faces a long prison sentence. Up to ten years imprisonment can be imposed for serious tax evasion. The Frankfurt Higher Regional Court has also classified cum-ex transactions as commercial gang fraud.
Courts and public prosecutors have been working on the Cum-Ex scandal for years. While some of those involved fled abroad, others went to court. In March 2020, the Bonn Regional Court sentenced two British stock traders to suspended sentences. Another Bonn trial also resulted in a prison sentence. And in February, the Bonn Regional Court sentenced a former managing director of a subsidiary of the private bank MM Warburg to imprisonment.
While Berger and more than 1,300 suspects are being investigated in the Cum-Ex scandal, an even bigger scandal may be looming. The Cum-Ex fraud is probably just the “tip of the iceberg,” said North Rhine-Westphalia’s Justice Minister Peter Biesenbach (CDU) in February of the “Frankfurter Allgemeine Zeitung”. There are “strong suspicions” for this. The investigators in Cologne had come across other methods of suspected tax fraud, the ministry confirmed.
Biesenbach made a declaration of war in the newspaper: “Anyone who thinks they can plunder the state must expect the state to accept the challenge. We want the money.”
Source: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
