The former chief executive officer of a defunct investment bank became the first top boss to be sent to jail for his role in the sprawling
Ex-Maple Bank GmbH CEO Wolfgang Schuck, 69, was sentenced to four years and four months by the Frankfurt Regional Court, which also convicted three colleagues on Monday. Schuck was fined 96,000 euros and had 2.9 million euros in assets seized.
"You were in charge; it hinged on your decision whether the trading strategy was implemented," Presiding Judge Werner Groeschel told Schuck when delivering the verdict. "We are convinced that the Cum-Ex deals wouldn't have happened had you put down your veto."
A 58-year-old American was sentenced to four years and two months in prison, while a 51-year-old trader was handed a term of three and a half years. A 62-year-old banker who cooperated with prosecutors was given a two-year suspended term, with asset seizures of €5.7 million.
Cum-Ex, a trading strategy set up to gain refunds on taxes that were never paid, siphoned off massive amounts of government revenue over several years. Named for the Latin term for "with-without," Cum-Ex took advantage of German tax laws that seemed to allow multiple investors to claim refunds of a tax that was paid only once. The nation moved to abolish the practice in 2012. Shortly after authorities started to probe. They are now looking at more than 1,600 suspects form across the financial industry.
While the tax losses alleged in Monday's case amounted to about €388.6 million, the total cost to taxpayers of all Cum-Ex schemes targeting Germany is estimated to be more than €10 billion.
The Maple bankers' trial has been pending since May of last year. The men had dubbed the strategy they ran from 2006 to 2009 the "German Pair." Initially, they organized the trades within the bank's group. Starting in 2008, they added other financial players on the short-seller side, including Barclays Plc, Bank of America Corp.'s Merrill Lynch and Fortis Bank Nederland NV. These banks and Maple prearranged the trades to obtain the illegitimate tax refunds, according to the court.
When Maple first considered starting Cum-Ex transactions in 2006, Judge Groeschel said it was clear everyone understood that the profits came from tax refunds based on shares that, as one banker put it "didn't really exist." A manager wrote up an email discussing the doubts about the strategy, so its problematic nature was clear from the start, the judge said.
Their employer was the German unit of Canadian bank Maple Financial Group Inc. The unit was closed in 2016 by German financial regulator Bafin as it couldn't shoulder the tax bill levied by German tax authorities, asking to pay back the money Maple received over Cum-Ex. The Canadian parent company went into liquidation the same year.
