Judge Roland Zickler found the former risk analyst at MM Warburg guilty of two counts of tax evasion on Wednesday.
(Photo: Reuters)
Bonn M. sits in the dock, outwardly unmoved. The 63-year-old investment banker listens intently as presiding judge Roland Zickler pronounces his verdict. He has just found him guilty of two counts of tax evasion.
The twelfth criminal chamber of the Bonn Regional Court sentenced the former manager of Warburg Invest, a subsidiary of the Hamburg private bank MM Warburg, to a prison sentence of three years and six months this Wednesday morning. Due to the long duration of the proceedings, two months are already considered to have been enforced.
“They were a cog in the machine that, if you took it out, would have brought it to a standstill,” says Zickler. “They had the power to let it go or to stop it.”
The thing that didn’t stop M. were deals that went through the funds BC German Equity in 2009 and BC German Hedge in 2010. The profits from these funds ultimately came from the tax coffers. This was based on share group transactions aimed at having a capital gains tax once paid be reimbursed several times. The damage in the accused case is said to have amounted to 109 million euros.
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The criminal proceedings dealt with the question of what guilt the investment banker M. bears. As manager of Warburg Invest – a subsidiary of the Hamburg private bank MM Warburg – he was responsible for two cum-ex funds in which rich investors could invest their money.
Sudden confession
During the trial against M. there was a surprising turn. At first, the accused denied the allegations – until the presiding judge Zickler urged the accused to finally tell the truth.
On the 13th day of the trial, the accused then made a confession. “I kept talking the events and events back then,” said M. finally in court. The reason was “to justify my actions at the time to myself, to others and also to the judiciary. That was wrong.” He feared that a refusal would have caused “the end of my career”.
Immediately after the confession, the judge made it clear that the court will consider the confession as a mitigating sentence. “You’ve done yourself one of the greatest favors anyone can do,” Zickler said. That was now confirmed. With the sentence, the criminal court remains well below the demand of the public prosecutor, who had pleaded for seven years in prison.
The defense, on the other hand, had only demanded a suspended sentence, since M. had only aided and abetted tax evasion.
The court saw it “clearly differently”, as Zickler made clear. According to the conviction of the court, M. was the perpetrator. The contributions to the crime were filtered out of the documents and M.’s confession also confirmed this. He made a significant contribution to the drafting of the contracts and was thus a “heart of making the fund structures workable”.
turning point in 2010
In 2009 he still acted with conditional intent, i.e. accepted the tax damage with approval. This is also supported by his statements that he had developed a feeling of disturbance and discomfort. In 2010 there was a major turning point, according to Zickler. “From now on you knew what happened”. This was shown, for example, by the internal communication from that time and the preparation of a meeting with the Federal Financial Supervisory Authority Bafin, at which the tax issue was deliberately to be hidden.
The tax damage also determines the amount of the judgement. According to the court, it was 60.62 million euros in 2009 and thus 1,200 times the limit for particularly serious tax evasion. For a particularly serious tax evasion, the sum of 50,000 euros is the limit. In 2010, the tax damage caused was 48.79 million euros.
For the act in 2009, the court therefore imposed a sentence of three years and for 2010 a sentence of two years and ten months. From this it formed a total imprisonment of three years and six months. In addition to the confession, the court also assessed the previous impunity of the ex-Warburg banker and his willingness to participate in further investigations as mitigating.
Ms lawyer Ingo Heuel announced that he would wait for the written reasons for the judgment and then decide on how to proceed. He emphasized that his client had provided educational assistance in the Cum-Ex proceedings and was “the first German banker who confessed” to the complex.
Ex-bank boss Olearius is on the defensive
M. is the second banker to be sentenced to a long prison term for his actions in the cum-ex scandal. The Bonn Regional Court had previously sentenced S., who had been MM Warburg General Representative for many years, to five and a half years in prison. According to the court, S., as the right-hand man of the former bank boss Christian Olearius, knew exactly how the business worked.
The key to the double refund was short selling. “We do not believe the defendant that he assumed owner sales,” said presiding judge Roland Zickler at the verdict. The verdict is not yet legally binding. The Federal Court of Justice will soon decide on the appeal.
With the first two sentences, the investigation file in the Warburg complex is far from closed. Two more Warburg bankers will soon have to take their place in the dock. It is a stock trader and another manager. Both are still employed by the bank today. The court has already accepted the indictment.
A number of other Warburg managers are also accused, including Olearius, who led the bank for many years and is one of the main owners. Olearius has always denied the allegations. However, his starting position has deteriorated as a result of the previous criminal proceedings. An indictment is considered very likely.
More: Raid on PwC: investigators search offices in Frankfurt.