Investigation collaborator stands trial over €428M tax scheme

Kai-Uwe Steck, one of the main collaborators with German prosecutors in their vast Cum-Ex probe, appeared in a Bonn court, charged with involvement in tax schemes costing the country €428 million ($450 million).

The trial was opened on Thursday morning as scheduled, with prosecutors reading 88 pages of the indictment, a spokeswoman for the tribunal said by email.  

The 53-year old lawyer once was a key figure in what became a Cum-Ex industry, involving some of the world's top banks. Steck was a law partner of Hanno Berger, the attorney dubbed "Mastermind" of the strategy that exploited how dividend tax was once collected. Their firm was instrumental in selling the business model to rich private investors. For years, they made millions from their work. After German prosecutors started to investigate, Steck flipped sides and became the first person to cooperate with the authorities in the probe.

Steck, who lives in Switzerland, traveled numerous times to police headquarters in Düsseldorf to testify and later was key to recruiting traders to follow his example. Under the fake name "Benjamin Frey" and wearing disguising make-up and a wig, he also appeared in German TV documentaries about the scandal.

In the same court where he's now on trial himself, Steck testified in numerous cases. These include the first German Cum-Ex trial against two former London investment bankers he'd convinced to talk to prosecutors. They were spared prison because of the information they provided.

At the time, Steck told the court that his personal profit in the deals was €50 million. He also testified at two trials against his former law partner Berger, who was later convicted and given two sets of sentences of 8 years in prison.

Given his extensive cooperation, Steck has long hoped to be spared trial or at least a sentence and his lawyers had argued for that. After he was indicted earlier this year, he fired his long-time defense team and hired a new pair of attorneys. 

Gerhard Strate, his current defense lawyer, didn't immediately reply to an email seeking comment.

The Bonn trial is reviewing several Cum-Ex transactions that were already subject of other cases, including deals at Hamburg-based M.M. Warburg Bank and at Duet Group. Other deals under scrutiny in his case were done using U.S. pension plans which were tax-exempt and thus a good vehicle to do Cum-Ex. The indictment covers the period from 2007 to 2015. 

The case is: LG Bonn, 62 KLS 1/24.