Fund manager and 2 Warburg bankers in court

District Court of Bonn

In addition to the Varengold business, the charges against the four Duet managers include eight US funds with which cum-ex deals were to be made in 2011.

(Photo: Reuters)

Bonn The accused appears inconspicuous between his two defense attorneys in black robes. S. wears a gray T-shirt, narrow glasses, and usually holds his hands folded in front of his mouth. While the public prosecutor reads out the indictment, S. looks intently at his laptop, his gaze rarely straying. S. is a British and Malaysian national who speaks English. The words of the prosecutor who read out the indictment are simultaneously translated for him.

S. has to put up with the accusation that he was involved in cum-ex deals. The Latin term refers to share deals that aim to have a capital gains tax that was only paid once “reimbursed” twice. The prosecutors accuse the accused of having damaged the German state together with other parties by 93.5 million euros. The group had applied for unauthorized tax refunds amounting to 215 million euros, a large part of which had not been paid out.

The financial firm Duet played a special role in the network of Cum-Ex participants. “The planning and implementation of the transactions required special expertise and a well-trained network of business contacts,” said the public prosecutor. This know-how could regularly be found in special asset management companies. “One such asset management company was Duet.”

The prosecutors do not see S. as primarily responsible. He was apparently in the back office and traded the shares. He received a bonus of 80,000 euros for this. That was just a fraction of what those responsible raked in from the cum-ex profits.

According to the indictment, S.’s co-defendants were responsible for the planning: During the period of the crime, Duet was managed by three managing directors, who are also accused along with S. This includes Henry Gabay, one of two founders of the company. Gabay protested his innocence to the Handelsblatt, but also declared that he wanted to face a trial in Germany. He claims to have relied on the advice of tax experts like Hanno Berger.

Many “separately persecuted” are still pending trial

The trial against S. is therefore just a foretaste of the pending trial against the three other men who, according to the indictment, were in charge at Duet. In view of the high profitability and the associated great importance of the cum-ex business for Duet, they are said to have been informed about all significant activities. They would have made all the important final decisions.

Specifically, the Duet deals involved funds that wealthy and institutional investors could use to invest in cum-ex. In 2010, for example, a fund was set up in which Duet and Hamburger Varengold Bank were close partners. As a shareholder of Varengold InvAG, the institute was indirectly involved in the launch of the cum-ex fund Caerus II Equity.

According to the indictment, Varengold also concluded contracts with Duet in which the distribution of the cum-ex loot was regulated. According to the public prosecutor’s office, these were bogus contracts in which the partners acted as if the remuneration for other services was at stake. Varengold considers the assessment that it was a sham contract to be “incomprehensible”.

The public prosecutor’s office is also investigating in the Varengold area. Former executives are listed in the Duet indictment as “separately prosecuted”. In addition, the Bafin recently initiated a special audit against the bank and commissioned the law firm Hogan Lovells to do so.

In addition to the Varengold business, the charges against the four Duet managers include eight US funds with which cum-ex deals were to be made in 2011. However, the Federal Central Office in Bonn no longer paid out the taxes in all cases. Investors suffered heavy losses.

MM Warburg in the spotlight again

In addition to the trial against the Duet manager, another trial has started in parallel before the 12th Major Criminal Court. It is aimed at H. and D., two bankers from MM Warburg. The public prosecutor’s office accuses them of being jointly responsible for damage of more than 300 million euros. Warburg Bank itself acted as a buyer in cum-ex deals and had the taxes reimbursed by the tax office. The subsidiary Warburg Invest was also involved in the cum-ex fund business.

Originally, the two defendants belonged to a circle of four people who had been charged together. But the court separated two cases. The chamber has sentenced Christian S., the bank’s former chief representative, to five and a half years. He started his prison sentence a few months ago. Detlef M., Managing Director of Warburg Invest, is to be imprisoned for three and a half years. The court had separated both cases and tried them separately.

The public prosecutor’s office has also filed charges against Christian Olearius, the long-standing boss and shareholder of MM Warburg. The court has been examining for some time whether it allows the indictment. Tax attorney Hanno Berger, who was also involved in the Warburg business, was sentenced to eight years in prison. The revision is running.

The interim proceedings are also delayed because of a serious glitch by the responsible criminal division. The court had sent internal documents to Olearius’ defense attorneys. The defense submitted that they viewed the judge as biased. As a result, the presiding judge of the chamber was dismissed due to concerns of bias.

H. and D.’s lawyers have now also filed an application for bias. However, it has so far been unsuccessful.

More: Former Minister of Justice files complaints against the heads of the Cologne public prosecutor’s office

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