Frankfurt prosecutors crack down on bankers who claimed refunds on dividend tax that was never paid
A former senior banker at the now-defunct Dutch lender Fortis has been arrested in Spain over his alleged role in a €51mn dividend tax fraud in a major escalation of the criminal investigation into the 'cum-ex' scandal.
Frankfurt prosectors are accusing the German citizen, who has not been named, of having been a driving force behind Fortis's involvement in the controversial share-swapping deals, that between 2008 and 2010 were used to reclaim dividend tax that was never actually paid.
The arrest in Mallorca shows that German law enforcement authorities, who have been investigating the practice for years and obtained a European arrest warrant for the banker, are increasing their efforts to get hold of key 'cum-ex' characters.
Fortis, which collapsed in the financial crisis and was acquired by Dutch peer ABN Amro, was allegedly one of the first lenders to exploited a design flaw in the German tax code. Frankfurt prosecutors raided ABN Amro’s offices in Frankfurt in 2019 and 2020.
Criminal prosecutors in Cologne are investigating more than 1,500 suspects who worked at some of the biggest names in German finance, including Deutsche Bank.
The law enforcement authority announced on Thursday announced that Spanish police arrested the 56-year-old former banker in Mallorca this week. The man had come into their crosshairs after he sold his last official residency in the Netherlands and attempted to leave without trace, according to a person familiar with the investigation. He had also transferred parts of his German property portfolios to relatives. German federal police eventually located him in Mallorca, where he was arrested at the airport on Wednesday.
He will now be extradited to Germany, where he is likely to remain in police custody. If found guilty in court, he can expect a multiyear jail term. Germany's highest court last year ruled that 'cum-ex' transactions had been illegal all along, and tax offenders who embezzled more than €1mn in tax face mandatory jail sentences under German law.
Hanno Berger, a former senior German tax inspector who was on the run since 2012, is currently facing trial in Bonn and Wiesbaden after he was arrested in Switzerland and extradited to Germany earlier this year. He denies all wrongdoing. Two former Freshfields partners, who advised clients that 'cum-ex' deals were legal, are going to a face trial in Frankfurt later this year.
The fraudulent refunds of dividend tax, which were wide spread in the decade to 2011 as they exploited a design flaw in the German tax code, have been in the crosshairs of criminal prosecutors in Germany for years and resulted in the first convictions of bankers with many more criminal trials to happen over the coming years.