The chief executive officer at asset manager Duet Group took all major strategic decisions on a controversial dividend-tax trading strategy that cost Germany €92 million, a key witness said at a German criminal trial.
So-called Cum-Ex trades were an important business to Duet and CEO Henry Gabay was the most involved of the three partners who owned the business, ex-Duet trader Aneil Anand told a court in Bonn on Thursday. While the owners didn't take part in the day-to-day management of the deals, they decided key issues and were informed of all developments, almost on a daily basis, he said.
Cum-Ex, a strategy that took advantage of a loophole in how Germany collected dividend tax, first appeared in interbank trading long before it was adopted by hedge funds and the super rich by the mid 2000s. The tactic involved multiple parties claiming refunds on a tax that was paid only once. Germany changed the way it collected dividend taxes in 2012, thus blocking the practice. It is believed to have cost the country's tax authorities at least €10 billion in total.
"Given the importance of that business, we would regularly communicate, either meeting face to face, on a regular basis, or by email." Anand, a suspect-turned prosecution witness, said. "They were involved in the discussions and they had to agree. If they hadn't agreed, they could have stopped it from happening."
Aneil testified at the trial of former Duet employee Vijaya Sankar who is being tried for role in the Cum-Ex scheme. In March, Sankar confessed and
While Gabay didn't know how the trades were technically set up, he understood the profits came from the withholding tax on dividends and the "possibility" that the levy was refunded twice, said Anand. The other two partners, Osman Semerci and Alain Schibl, were also involved, while less so than Gabay. Anand told the court that he would discuss issues with Semerci if Gabay wasn't around. Schibl was the partner least involved, he said.
Semerci's German lawyer declined to comment. Gabay and his lawyers didn't immediately respond to requests for comment. Gabay has previously denied any wrongdoing. Schibl's lawyer said his client will only comment in court and not to the press.
Anand set up Cum-Ex trades at Duet in 2010 and is also being probed in Germany but hasn't been charged yet. He has been cooperating with prosecutors and is the key witness in the case. His testimony led to the indictment of the three partners that was filed alongside Sankar's in October, evidence that led to Gabay's
The Duet Group is a two-decade-old, London-based multistrategy firm founded by former bankers Gabay and Schibl. While it once managed billions of dollars across everything from real estate to stocks and commodities, its status is unclear amid the Cum-Ex probe. Some Duet entities went into liquidation last year in the U.K., filings show.
