German Prosecutors Charge Four Ex-Commerzbank Employees in Tax Fraud Case
Overview of the Commerzbank Tax Fraud Charges
By Tom Sims
Background of the Alleged Tax Evasion
FRANKFURT, Aug 20 (Reuters) - German prosecutors have filed charges against four former employees of Commerzbank over alleged tax evasion for activity in 2008, the latest crackdown on an industry-wide scheme that cost taxpayers billions of euros.
The practice, which flourished during the financial crisis and has since ensnared scores of banks and hundreds of individuals, involved the stock trading of German companies around dividend payout days. Authorities say it defrauded the state and taxpayers.
Details About the Accused Individuals
Prosecutors in Frankfurt said on Thursday that the four individuals — two British citizens, one German and one American, between the ages of 59 and 66 — were facing charges under "suspicion of serious tax evasion".
Prosecutors said the bank was based in Frankfurt, but they didn't name it. Two people with direct knowledge of the matter told Reuters the bankers worked for Commerzbank.
Commerzbank's Response to the Charges
"We do not comment on legal proceedings involving third parties. Commerzbank is not a party to the proceedings itself," the bank said in a statement.
The Cum-Ex Trading Scheme Explained
The practice of so-called cum-ex trading, also known as dividend stripping, saw banks and investors swiftly trade shares of companies around their dividend payout day, blurring stock ownership and allowing multiple parties to falsely reclaim tax rebates on dividends.
Financial Impact on the State of Hesse
Frankfurt prosecutors said this particular case shortchanged the state of Hesse, Commerzbank's base, of €20 million.
"The defendants are alleged to have developed, approved, and executed the so-called cum-ex transactions through deliberate and intentional collaboration," the prosecutors said.
Ongoing Investigations and Industry Implications
Commerzbank, which Italy's UniCredit has been pursuing for a potential tie-up, has warned in its financial reports that prosecutors were investigating the trades and that the bank was cooperating.
Sueddeutsche Zeitung first reported that the bankers formerly worked for Commerzbank.
(Reporting by Tom Sims; Editing by Hugh Lawson)
