For years, banks and investors cheated the state out of billions with opaque stock transactions. A particularly large wheel turned the Maple Bank. A defendant provides insights into the system.
The Frankfurt trial surrounding cum-ex stock deals continued with a confession from the accused ex-Maple banker. “In retrospect, the German Pair strategy was too good to be true,” said the former banker during the main hearing in the regional court.
In cum-ex transactions that went under the name “German Pair Strategy” at Maple Bank, banks and investors were reimbursed for capital gains taxes they had never paid and were estimated to have cheated the state of at least ten billion euros.
Banker sees blame on the appraisers
“We would not have carried out the transactions without the reports; they gave us a false sense of security,” said the former Maple banker in the trial on the accusation of serious tax evasion or aiding and abetting. A former high-ranking Freshfields tax lawyer is also accused in the proceedings before the 24th Grand Criminal Chamber. The public prosecutor’s office accuses him of having made the multi-billion-dollar Maple deals possible at the expense of the tax authorities through “courtesy reports”.
This is how the Cum-Ex deals worked
In cum-ex deals, which reached their peak between 2006 and 2011, investors took advantage of a loophole in the law: around the dividend record date, shares with (cum) and without (ex) dividend entitlement were moved back and forth between participants. In the end, tax offices refunded unpaid taxes. In 2012, the state closed the loophole. In 2021, the Federal Court of Justice (BGH) decided that cum-ex transactions should be viewed as tax evasion.
The transactions were “aimed at reimbursing unpaid taxes,” said the accused former Maple banker. “If I had applied common sense, I should have recognized that a double crediting of capital gains tax could not have been desired.”
A good 388 million euros in tax damage
The indictment puts the tax loss from Maple Bank’s cum-ex transactions at a good 388 million euros. In 2016, the German institute with Canadian roots was closed by the financial regulator Bafin because it was threatened with over-indebtedness due to a tax provision in connection with cum-ex transactions.
“The bottom line is that I can say that the decision to carry out the cum-ex transactions cost the bank its existence and the employees their jobs and their security,” said the former Maple banker. “I deeply regret that I was involved in these transactions and apologize to anyone I may have caused harm as a result.” He wanted to face his responsibility and therefore paid more than ten million euros, including shares, into the Maple Bank insolvency estate. He also pays back bonuses.