During her frequent journeys from her Cologne base to the financial epicenter of Frankfurt, Anne Broerhilker instills apprehension in some of the foremost investment banks worldwide. As the leading local investigator in Europe’s most prominent tax scandal, she travels extensively on the Intercity Express bound for the heart of Germany’s financial hub.Thank you for reading this post, don't forget to subscribe!
Amid the grand glass and concrete offices of the city’s major global banks, scenes with her in her steely and spectacled demeanor unfold. Typically, a police raid on one of them would occur at dawn the following day.
Even though the Come-X scam is unraveling in Germany, it is poised to embroil the city, where banks and traders are suspected to be deeply involved in an extensive tax fraud.
The likes of Britain’s Barclays, Bank of America’s Merrill Lynch, Morgan Stanley, BNP, and Nomura, along with prominent law firms and auditors, are under scrutiny in Germany.
Since March 2022, prosecutors have executed no fewer than 13 raids, and it is anticipated that the pace of inquiries will escalate.
Germany is at the core of a continent-wide investigation into Come-X, a contentious trading strategy that exploited loopholes in the dividend tax collection process, enabling numerous investors to only claim a tax refund once.
Expanding Influence: Chief investigator Anne Broerhilker, inset, is so preoccupied that a new courthouse connected by high-speed rail to Frankfurt is necessary
The alleged offenders were financial traders – many of whom were based in London – along with their clients. The taxpayers were the victims. In the case of Germany, where dividend trading ceased in 2012, the public coffers could suffer losses of up to £10 billion.
At 50 years old, Broerhilker has been entrenched in the Cum-X case for a decade. Her Cologne operation has become the most ambitious of Germany’s three regional investigations to date. Currently, she oversees 120 inquiries involving 1,700 suspects, the majority located in London.
The roster of suspects is expanding as Germany’s fraud czar continues to pursue her targets.
Barclays employed 124 bankers who were subsequently identified as suspects. According to the financial newswire Bloomberg, charges could materialize as soon as next year. The bank declined to provide any comment.
Authorities in the Netherlands, Finland, and Belgium have initiated their own probes, while Denmark has lodged nearly 500 civil lawsuits relating to dividend tax reimbursements.
Last week, Danish authorities secured authorization from the High Court in London to pursue an alleged £1.4 billion tax fraud case after the Supreme Court ruled that it could be adjudicated in England.
Legal experts suggest that the ruling by the highest court in England will have a profound impact on other co-exist cases currently underway.
“This decision will resonate globally,” remarked Aziz Rahman, senior partner at financial crime specialist Rahman Raveli. “It should be considered a significant triumph for the Danish tax authorities,” Rahman noted. “It will also provide reassurance to other nations aiming to recoup substantial sums disbursed due to Come-X.”
One of the defendants in the Danish case is the British hedge fund trader Sanjay Shah, who operated the now-defunct Solo Capital. They refute all allegations. Shah’s representative was approached for a response. In a separate development, a former Fortis banker was sentenced to three years and three months in prison for their involvement in a trading scheme.
The German, identified as Frank H, was convicted in a Frankfurt court of embezzling £45 million through deceptive come-ex transactions.
ABN AMRO, the Dutch bank that acquired Fortis’ portion of the business, has refunded the money to tax authorities.
Following the conviction, the tally of individuals found guilty so far has surpassed 14.
German authorities have also effectively recouped approximately £2.7 billion, not inclusive of reimbursements secured through a series of criminal prosecutions.
Various other high-profile trials are ongoing. These involve Henry Gabay, the founder of the now-defunct Duet Group, a London-based asset management firm.
In a recent statement to a German court, Gabay professed his innocence, asserting that the “detrimental” cum-ex charges leveled against him were fabricated by his former business associates. “My entire life is in ruins,” lamented Gabay to the judges. He contends that he relied on the legal counsel that endorsed the transactions at that time.
Defendant: Hedge fund trader Sanjay Shah
Gabay’s lawyer expressed that his client “deeply regrets” that “well-known” banks and legal experts employed his hedge fund to conduct transactions now recognized as illicit.
Also facing trial in a separate case is Christian Olearius, the former head of the esteemed private bank MM Warburg, which was seized by the Nazis in the late 1930s. Olearius, 81, is accused of orchestrating a £245 million dividend tax fraud. He has repudiated all allegations. Olearius, who has connections to German Chancellor Olaf Scholz, recently accused investigators of plunging the 225-year-old Hamburg-based bank into its most significant crisis since the Nazis ousted MM Warburg’s Jewish proprietor in the late 1930s.
A court recently awarded Olearius a substantial sum as compensation after it was revealed that investigators had confiscated his personal diaries and that incriminating details from their investigation were leaked to the media.
Olearius accused investigators of conducting a “shallow, flawed, and biased” inquiry and contended that the accusations against him were founded on “insinuation, repetition, and speculation.” If found guilty on all counts, he faces a potential ten-year prison term.
Olearius and co-owner Max Warburg have already remitted £175 million from their personal holdings to offset tax losses arising from the bank’s involvement in low-ex deals. MM Warburg declined to furnish any comment.
An innovative £38 million courthouse dedicated to adjudicating cases brought by Frau Broerhilker is set to open in the Siegberg suburb of Bonn next year. This could prove convenient for defendants based in London as Siegburg is linked to Frankfurt Airport via a high-speed rail service, enabling them to attend trial sessions by air.
Observers of the suspects, be vigilant.
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