In Germany’s biggest tax fraud trial, two British investment bankers stand accused of helping engineer dubious transactions resulting in massive tax losses.
There’s been no lack of superlatives used by the media when describing the criminal trial that began on Wednesday in the western city of Bonn, Germany.
Reporters have called it “the biggest financial fraud trial” and at the same time “the most complicated” tax case trial in modern German history.
The trial involves two British investment bankers, Martin S.
and Nicholas D. in a double role as defendants as well as the main witnesses in the case which centers around so-called cum-ex trading schemes that the two and many others were involved in between 2006 and 2011.
What exactly are cum-ex deals?
Cum-ex trades are equity deals.
Investors rely on the sale of borrowed shares right before a given firm was slated to pay dividends.
To put it differently, shortly before dividend payout day, shares with (“cum”) and without (“ex”) dividend rights were quickly traded among various market players, resulting in double tax reclaims for share traders — reclaims that authorities now call illegitimate.
Legal loophole or downright fraud?
It’s fraud by today’s standards, but was it illegal in the years after the turn of the century? This is exactly what the court has to find out and assess.
While for some of the players involved in cum-ex-related schemes the one and only objective was to cash in on double tax reclaims, others may just have provided legitimate help in transactions while being unaware of any tax crimes.
“A lot of people in the financial industry will follow the proceedings with bated breath,” Bloomberg quoted Hogan Lovells attorney Heiko Gemmel as saying. “The outcome of this trial will likely determine the trajectory of other cases.”
Deutsche Bank say it didn’t do cum-ex deals on its own account
Why is there so much fuss made about it?
The reason why both market players and authorities are nervous about cum-ex trades is obvious it’s the sheer amount of money that was involved.
Tax offices reimbursed capital gains tax that had never been paid at all. The cum-ex deals of the two British bankers in question eventually meant a tax loss of €400 million ($443 million). Across Europe, the damage caused by cum-ex deals in general was calculated to be a staggering €55 billion.
Who else was involved?
Cum-ex deals are extremely complex and involve large sums that need to be handled in a coordinated way.
It requires the participation of many players, all of whom profit from the deals one way or another. You can rightly say that the entire financial industry was at work.
You needed buyers to be taxed in Germany, short sellers borrowing the shares from various sources including pension and investment funds; and you needed lenders and brokers to make the deals happen.
The role of Germany’s biggest lender Deutsche Bank in the deals will also be scrutinized.
The scandal-hit bank was involved in financing clients’ cum-ex transactions alongside many other lenders such as Sweden’s SEB, Barclays and M.M. Warburg & Co.
Frederik Richter from the German research network Correctiv told DW that the German Finance Ministry got wind of dubious cum-ex deals as early as 2002, but didn’t act right away. “There are people who said that following the global financial crisis, cum-ex deals were the only lucrative business left for the ailing banks,” Richter said.
“That may have prompted the regulators to turn a blind eye to those kind of transactions so as not to harm the banking sector.” Meanwhile, former legislative loopholes have been plugged in Germany.
There was an amendment in 2012 but that didn’t go far enough. Another amendment followed in 2016, making cum-ex deals in their previous form impossible.
The currency markets
*** These are indicative figures as per the 16th. September, 2019.
The commodity markets in
the Greater Banjul Areas
*** Market prices are as at 16th. September, 2019
ENTREPRENEURSHIP CORNER
27 Motivational quotes for every millennial in the middle of a career change
What happens when you get the dream job you thought it would take you longer to get or when you throw yourself into a career you thought you’d always love, and now you no longer do? What do you do when you accomplish what you thought you couldn’t accomplish and the result isn’t as satisfying as you thought it would be? How do you navigate the guilt of feeling ungrateful when you know deep down you want more? How do you break past the cloudiness of not feeling good enough for the next level, especially when you know you can’t stay where you are? Whether you are wanting to move to a different company or a new industry, career moves are daunting.
These are questions no one talks about out loud because we fear some may brush it off as “good problems” to have. But when you find yourself at the crossroads between what you’ve done and what you’re hoping to do next, the burden is as heavy as any other weight.
That’s why when I stumbled upon New York Times best-selling book, More Than Enough by former Teen Vogue Editor in Chief, Elaine Welteroth, I knew I had to share the words that explained how so many young professionals feel in the midst of career changes. Her words and the words spoken to her, in this book, are the exact melodies you need to hear if you’re on the verge, or in the middle, of a transition in your career.
1. “When the world tells you to shrink, expand.”
2. “There is a divine order, a divine flow to our lives. We don’t need to have all the answers. But our job is to keep on dreaming and trusting enough to put one foot in front of the other.”
3. “Discovering what you don’t want is just as important as finding out what you do.”
4. “If you know what you want, ask for it. And be specific. You might just get it.”
5. “If we aren’t vigilant, we can move through our entire lives feeling smaller than we actually are by playing it safe, by unconsciously giving away our power, by dimming our radiance, by not recognizing there is always so much more waiting for us on the other side of fear.”
6. “Falling down is inevitable. It’s the getting back up that’s on you.”
7. “Nothing good can grow if you don’t nourish your own soil.”
8. “The greatest leverage in any negotiation is a successful track record and a genuine willingness to walk away.”
9. “When the music changes, so must your dance.”
10. “There is no glory in a grind that literally grinds you down to dust.”
11. “Bite off only what you can chew. Take one bite at a time. Chew thoroughly. Swallow fully. Breathe. Make room for the next bite. Find time to laugh. It’s better for digestion.”
12. “Your body and soul have a way of telling you when the music is changing.”
13. “Growing a sustainable career that withstands the test of time requires consistent energy that builds momentum over time. But when you have been running nonstop on a hamster wheel toward a goal with blinders on, you might not know how to slow down, let alone get off. Even when you need to.”
14. “There is hustle and there is flow, and you cannot successfully achieve one without the other.”
15. “There is more honor in losing a battle with dignity than in winning a war without it.”
16. “There is work, and then there is your life’s work.”
17. “Sometimes it takes reaching the summit to see what’s on the other side.”
18. “The universe is calling you to be a little bit braver right now.”
19. “Our lives are a series of dreams realized.”
20. “Job titles are temporary. But purpose is infinite.”
21. “There are no destinations, no happily ever afters in real life, no glossy pots of gold at the end of the rainbow. There are only new beginnings.”
22. “Just as you reach your first summit, you’ll find a new horizon awaits, one with new mountains to climb, new peaks and valleys to wander across.”
23. “Trust that life will continue molding you, challenging you and readying you for your next adventure.”
24. “Only you can choose to walk away from what no longer serves you, to leave what you’ve already conquered, and to boldly step into what’s next.”
25. “When you feel yourself existing in the space between dreams realized, parts of you will feel too big for where you are, while other parts of you will feel too small for where you’re going. Go anyway.”
26. “When you get lost, it’s okay to stop, to look up, to look within for the answers they’re always there.”
27. “You have done enough. You are enough. You were born enough.”
Life isn’t one long straight road. Life is one long journey, full of many roads, twists and turns. Have the courage to embrace the twists and turns when they come, because they always do.
