The verdict is now moot. “In all cases, the criminal court based its assessment of evidence on documents without making them the subject of the main hearing,” said the Federal Court of Justice. The Karlsruhe judges complained that the district court neither formally read out the stock transactions made by the investment company nor the accused’s private derivatives trading during the main hearing, nor did it introduce the self-reading procedure possible under the Code of Criminal Procedure. “A completely unnecessary mistake,” said a lawyer involved in the matter. The matter must now be heard and decided by another criminal division of the district court.
The case had caused a stir in the scene because the charges were directed against H., a fund expert at Union Investment who had been well respected until then. Until late summer 2020, the manager was responsible for two of the company’s most important investment funds – Uniglobal and Uniglobal Vorsorge, which today have fixed assets of more than 20 billion euros. Overall, H. managed fund assets of over 30 billion euros. His accomplice worked in a senior position at the private bank Hauck & Aufhäuser.
The two money managers are accused of front running. This term describes a method by which stock traders transact securities for their own account and thereby illegally reap profits. The defendants knew in advance about price-sensitive events at certain stock corporations. They used this knowledge for their own purposes.
The division of labor was as follows: the union manager informed his accomplice that he would buy or sell values from various companies with a fund he was managing. The latter then carried out commercial transactions to his advantage with his own means. At the end of a large number of deals, the two were able to book profits in their private accounts.
The reversal of the judgment has formal reasons
The process started with a report by the Federal Financial Supervisory Authority Bafin, which reported to the Frankfurt public prosecutor at the end of August. They then initiated investigations and searched the suspects’ rooms. Both suspects were subsequently taken into custody.
In the main hearing, the accused confessed to their crimes and showed remorse. The main defendant was at times on the verge of tears in court. He tried to explain how he became an insider trader. An enormous strain on the job was paired with private problems. In this situation he had hoped that at least his work commitment would be better rewarded financially.
However, according to the manager, Union Investment did not keep its word and was therefore deeply offended. “This breach of trust has pulled the rug out from under his feet,” said his lawyer at the hearing. Rather than seek open conflict or change employers, he chose to pursue criminal ways to earn more money.
The Federal Court of Justice did not question the insider trading itself. The annulment of the judgment had purely formal reasons.
In its notification, the Federal Court of Justice did not go into the amount of the confiscation amounts. They are quite controversial. Because the regional court did not take the insider profits as a benchmark for its account, but the trading volume. According to the verdict, the main defendant now has to raise 45.41 million euros – a multiple of the profits he had made with the illegal transactions. According to the indictment, these amounted to 8.3 million euros. His accomplice or his GmbH had earned 386,000 euros on the stock exchange. In this case, the court demands a payment of 3.34 million euros. It remains to be seen whether these demands will endure.
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