BGH confirms long prison sentence for Warburg bankers

Cologne Now it’s final: In Germany, for the first time, a banker has to go to prison for his involvement in cum-ex transactions. The Federal Court of Justice (BGH) rejected the man’s appeal against the judgment of the Bonn Regional Court. The 12th Criminal Court there had sentenced S., the former chief representative of the Hamburg private bank MM Warburg, to five and a half years in prison and confiscation of the “wage” of 100,000 euros.

This further solidifies the case law on share transactions, which were aimed solely at having capital gains tax refunded that had not previously been paid at all. The term cum-ex refers to trading in securities around the distribution date with (cum) and without (ex) dividends.

The Federal Court of Justice had already approved a first criminal judgment from Bonn against two London stock traders. In addition, the Federal Fiscal Court and the Federal Constitutional Court recently ruled in favor of the Treasury. Cum-Ex transactions are therefore considered illegal and punishable.

The decisions are important milestones in the further legal processing of the scandal. Banks, investors and consultants are said to have caused damage of twelve billion euros. The investigations, which have been ongoing for many years, are proving difficult because the transactions were complex, cross-border and often aimed at concealment.

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Although the crimes date back ten years and more, only three judgments have been made. Three criminal proceedings are currently underway at the regional courts in Bonn, Wiesbaden and Frankfurt. Tax attorney Hanno Berger is currently on trial in Bonn. The prosecutors describe him as the “spiritus rector” of the cum-ex deals.

Close exchange with Hanno Berger

Berger’s proceedings are about the business of MM-Warburg-Bank, which the lawyer advised on. At the same time, Berger exchanged views with the general representative S., whose conviction has now been confirmed by the Federal Court of Justice.

S. was considered a confidant of the longtime Warburg boss and shareholder Christian Olearius. As his right hand, the general manager was regularly present when Berger presented and explained the cum-ex model. Berger received a profit share that S. knew about. According to the court, S. understood the business very well. It was clear to him that the profits came from the tax fund.

The Federal Court of Justice agreed with this view. “The defendant either signed the corporation tax returns, which contained false information about the bank’s refund claims – which actually did not exist – or he checked the prepared drafts and released them despite false information on the signature,” the BGH explained. Together with other responsible persons, the accused S. achieved that the responsible tax office wrongly paid MM Warburg a total of more than 168 million euros.

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Alexandra Schmitz, S.’s defense attorney, did not want to comment on the BGH decision when asked. However, she explained that the filing of a constitutional complaint was being examined.

The Warburg cause is also the subject of an investigative committee of the Hamburg Parliament. The committee wants to clarify how it came about that the Hamburg tax authorities waived the reclaim of taxes from the Warburg-Bank’s cum-ex transactions. In 2016, the statute of limitations threatened. The former mayor of Hamburg, Olaf Scholz (SPD), met several times with bank boss Olearius.

Scholz denies any influence. The fact is that the tax office ultimately waived the money – although the public prosecutor’s office was already investigating at the time. In 2017, the Hamburg authorities finally had to be forced by the Federal Fiscal Court to retrieve the cum-ex millions from Warburg.

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