Two former HVB bankers sentenced to suspended sentences

Dusseldorf/Wiesbaden It’s not often that bank advisors are convicted for helping clients evade taxes. This was precisely the allegation made by the Frankfurt Public Prosecutor’s Office against two former employees of Hypo-Vereinsbank (HVB). Now the district court of Wiesbaden has made the judgments.

Andreas B. was sentenced to two years in prison for complicity. His former colleague G. was sentenced to one year and two months for aiding and abetting tax evasion. Both sentences are suspended.

It is the fourth verdict in the cum-ex scandal. The Latin term describes a form of tax evasion in which almost the entire financial industry was involved. Those involved traded huge blocks of shares in circles. In this way, they got a refund of capital gains tax that had not been paid at all. According to expert estimates, the damage to the general public was at least twelve billion euros.

The two HVB customer advisors were convicted for their services to Rafael Roth, a very wealthy Berlin real estate magnate who has since passed away. HVB led Roth in the category of the super-rich, known in technical jargon as “Ultra High Net Worth”. In 2006, the bank loaned him 500 million euros for cum-ex deals that it had proposed itself.

For three years, HVB bought and sold shares in German Dax companies on behalf of the customer. It didn’t matter which stocks were traded, the advisers explained. All transactions were secured, the risk was zero. It was all about moving as large volumes as possible. In the first year, HVB traded shares worth EUR 3.6 billion for Roth, in 2007 it was EUR 5.8 billion and in 2008 it was even EUR 6.4 billion.

Damage in the hundreds of millions

Roth later stated that he never knew that the profits from these deals would come from the tax coffers. The HVB issued false tax certificates to the company, which was founded especially for the cum-ex business. The Roth company cashed them in at the tax office in Wiesbaden and collected 113 million euros.

Then came the audit and demanded the money back. The Frankfurt Public Prosecutor’s Office then took up the matter. In November 2012, investigators searched Hanno Berger’s HVB offices and business premises.

The tax attorney had advised Roth on the cum-ex deals. In 2012 he fled to Switzerland and was extradited to Germany in March 2022. He is currently in the dock because of this and other tax transactions in Bonn and Wiesbaden.

As early as 2017, the Roth case was brought to trial by the Frankfurt Public Prosecutor’s Office. The defendants also included Berger, New Zealand banker Paul Mora and two London stockbrokers. Because Berger hid in Switzerland for a long time and Mora went into hiding in New Zealand – he is wanted internationally – the proceedings against the two HVB customer advisors were initially brought forward. The two Englishmen were initially spared because of the Corona travel restrictions.

The verdict against the German accused is not yet final. Their defense attorneys called for acquittals in their pleadings. According to her statements, the former HVB employees themselves did not even understand the background to the cum-ex deals that they offered their customer Roth. Both would have relied on the tax experts involved.

Immense damage to the bank

For HVB, the Cum-Ex chapter is still not completely closed – and terribly expensive. The bank had to pay for a large part of the tax damage, plus a fine of 9.8 million euros. And the bill was even longer.

In order to demonstrate sincere interest in clarification, HVB commissioned entire companies of external consultants and lawyers. According to insiders, seven law firms and consulting firms have billed a total of around 100 million euros.

In 2018, HVB sued its former board members Rolf Friedhofen, Ronald Seilheimer and Andreas Wölfer for damages. In 2020, the parties reached an out-of-court agreement – ​​according to insiders, the managers paid an amount in the low double-digit millions.

New expenses are already looming. During an audit, officials found problematic transactions between 2013 and 2016. HVB is said to have been involved in so-called cum-cum transactions. Even with this type of stock trading, those involved try to circumvent the tax regulations.

The Federal Ministry of Finance and various financial courts classify cum-cum deals as illegal in principle. “HVB is in constant contact with the responsible supervisory and tax authorities on these matters. In doing so, HVB also takes into account the current view of the tax authorities,” says the current annual report. When asked, the bank did not want to comment on the amount of its provisions for the transactions.

More: Illegal stock deals of the Cum-Cum brand: Citizens’ movement Finanzwende calls for EU state aid proceedings