An ex-Macquarie Group Ltd. banker on trial for alleged tax crimes in a €320 million ($366 million) German Cum-Ex case may dodge prison after the prosecution asked the court to impose only a suspended sentence of one and a half years.
In the first
The 49-year-old man, who under German law can only be identified as Philip G., confessed to the Bonn Regional Court that he was involved in Cum-Ex deals that took place in 2011. His defense lawyer called for a suspended sentence of one year, given the confession and the fact that his client only had a supporting role. Philip G. was a managing director at the Australian bank's Munich branch for 14 years.
Cum-Ex was a controversial trading strategy designed to obtain duplicate refunds by taking advantage of how dividend taxes were collected. Germany changed its practice in 2012 and is now probing about roughly 1,800 suspects from across the global financial industry in a sprawling investigation that has lasted years. More than 20 people have been convicted in German courts for their role in Cum-Ex.
Bankers at Macquarie's London office were
While Philip G. wasn't a trader himself, he had a coordinating role within the bank and at times acted as a "trouble shooter" in case the money flow was held up, prosecutor Ira Lais said. Macquarie financed the deals with several billion euros. Philip G. was recruited for that role because as a Swiss, he was deemed meticulous and reliable. He also liaised with law firms retained to have the transactions vetted, she added.
The banker can't defend himself by claiming the Cum-Ex deals were legally cleared, because the law firms relied on a distorted set of facts, prosecutor Susanne Wollmann said. When an employee raised that within the bank, he got in trouble, she said. At some point Macquarie asked a law firm to delete the fact that the deals were based on short selling, she added.
"The bank wasn't so much interested in whether the deals were legal but rather whether there was a reputation risk, a risk of being exposed," said Wollmann. "Even the leadership wasn't so much interested whether the actions were legal but rather whether they would be discovered."
The tax-refund claims weren't paid out in the end because the tax authorities at this point had become suspicious about the transactions. Macquarie nevertheless earned about 60 million in the deals because its fees weren't dependent on a successful outcome, according to the prosecutors.
Philip G. earned some leniency however since he opted to cooperate in the probe and the crimes happened some 15 years ago, they said.
His defense lawyer Friedrich Schultehinrichs said his client also deserves leniency because he didn't opt to avoid trial by hiding in Switzerland. At the bank, he was only in the lower spheres of middle management. While the right thing to do would have been to speak up against the deals or even to leave the bank, he just didn't have the strength at the time. He had also shortly before become a father.
"You really have to be exceptionally self-assured in such a situation," said Schultehinrichs. "Personally, I'm glad I wasn't in his shoes."
Macquarie has said that as many as 100 former and current staff members were swept up in the probe, including Chief Executive Officer Shemara Wikramanayake and her predecessor Nicholas Moore. In a presentation to investors, the bank said it provided for more potential financial fallout since it's also facing a number of civil claims over the issue.
The case is: LG Bonn, 29 Kls 2/25.
