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UPDATE 1-German court says 'cum-ex' trading scheme was illegal

Published 05/12/2019, 03:08 am
Updated 05/12/2019, 03:14 am
© Reuters.  UPDATE 1-German court says 'cum-ex' trading scheme was illegal

(Adds quotes from judge, background)

BONN, Dec 4 (Reuters) - A sham trading scheme to make double tax reclaims that Germany estimates cost it more than 5 billion euros in total was illegal, a criminal court in the German city of Bonn said in its first statement on a continuing trial on Wednesday.

The landmark trial of two British bankers is the first criminal case brought against those involved in 'cum-ex' trading, a practice described by German Finance Minister Olaf Scholz as a "scandal".

"This was a collective case of thievery from state coffers," said Judge Roland Zickler, in an initial assessment that may or may not be upheld at the end of the trial. The defendants, as well as investors who are not part of this trial, could be ordered to surrender profits to the state, he added.

A ruling in favour of the state in the Bonn case would make it easier to pursue other cases and recover more of the money lost.

Britons Nicholas Diable and Martin Shields are alleged to have orchestrated a sham trading scheme to make illegitimate double tax reclaims of more than 450 million euros ($496 million). face a possible jail term of up to 10 years, as well as a court order to repay money they earned from the trades if found guilty.

The defendants have said that the practice was common knowledge and that they had no reason to believe at the time that it was legally questionable. Their detailed testimony could lead to a reduced sentence, Zickler said.

Prosecutors allege that players in the scheme misled the state into thinking a stock had multiple owners, who were each owed a dividend and a tax credit.

The alleged scheme involved trading shares rapidly around a syndicate of banks, investors and hedge funds to give the impression of numerous owners, each entitled to a tax rebate.

The case, Germany's biggest post-war fraud investigation, is being closely followed in London and Frankfurt, where much of the trading was organised, according to bankers and court documents. ($1 = 0.9073 euros)

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