An ex-Freshfields Bruckhaus Deringer partner who helped top investment banks navigate the Cum-Ex trading strategy behind Europe's biggest tax scandal was sentenced to three and a half years in prison.
Ulf Johannemann, once the law firm's head of global tax, was convicted by a Frankfurt Court for advice he gave Maple Bank GmbH in Cum-Ex deals that cost Germany a tax loss of €374 million ($405 million). A former Maple banker on trial alongside him who cooperated fully with prosecutors got a two-year suspended term.
The former banker, Maple's head of trading at the time of the deals, was convicted of four charges of tax evasion, Judge Werner Gröschel said at the hearing on Tuesday. He also has to pay almost €2 million — almost equal to what he earned from the transaction.
A lawyer for Johannemann didn't immediately reply to an email seeking comment.
Johannemann only aided in that crime and couldn't be convicted as a perpetrator himself, Gröschel said. However, by writing legal opinions whitewashing Cum-Ex deals he violated basic principles any attorney needs to stick to, according to the judge.
For the London ranks of global investment banks, Freshfields was the go-to firm for advice on Cum-Ex — a ploy that gamed the tax system to pass vast sums from Germany's treasury into the hands of scores of investors and banks. The list of the firm's clients ranged from JPMorgan, Merrill Lynch, Barclays Plc, Lehman Brothers and Fortis to Macquarie Group Ltd. and ICAP Plc. Bankers of all those lenders are being probed in Germany in the vast Cum-Ex investigations.
"You violated something that can be taught to any reasonably-talented elementary school student. You can't get twice what you only pay for once," said Gröschel.
Johannemann, 52,
Freshfields said it wasn't a party to the case and declined to comment on the outcome. The law firm said in the statement that it has worked with authorities to learn from the matter and will scrutinize Tuesday's ruling to see what further lessons can be made.
Freshfields agreed to pay €10 million to settle the probe over the law firm's work for Maple and paid the lender's insolvency administrator €50 million to settle related claims.
Johannemann had long argued what he did was in line with the law until December, after the court told him to expect a conviction, he then entered a confession. He said he
"You confession came at the very last minute, as if you speculated for a late goal in overtime," said Gröschel. "We had the impression you didn't confess because you think you did something wrong but because you were angry you got caught."
The verdict may not be the last prosecution faced by Johannemann. He and other former Freshfields attorneys are also being probed by Cologne prosecutors who can file more charges over their work for other banks.
