London Bankers Avoid Jail Time in First German Cum-Ex Trial
19 Mar 2020

Two former London investment bankers were convicted of tax evasion at Germany’s first trial over so-called Cum-Ex trades in a landmark ruling that could lead to hundreds more cases.

The bankers, Martin Shields and Nicholas Diable, were able to avoid jail by cooperating with prosecutors. The Bonn court gave both of them suspended prison terms, according to a spokesman.

Shields, 42, and Diable, 40, were on trial for what prosecutors say amounted to a 400-million euro ($437 million) tax evasion. The verdict was brought forward by several weeks because of the coronavirus outbreak.

Cum-Ex transactions took advantage of a now-abandoned method of taxing dividends, which made it possible to get multiple refunds through a combination of short sales and other transactions. The practice ended in 2012 when Germany revised its rules, but Cum-Ex may have cost taxpayers more than 10 billion euros.

Before global events were upended by the coronavirus, the Cum-Ex case was seen as a key moment for the banking industry. Dozens of banks and bankers have been swept up in the scandal over the use of rapid stock sales to obtain duplicate tax deductions.

Shields got a suspended sentence of a year and 10 months, the term prosecutors had asked for, and must repay 14 million euros. Diable’s sentence of a year was also suspended. Diable’s lawyer, Stefan Kirsch, didn’t immediately reply to an email seeking comment.

Their cooperation paid off: under German rules, causing a tax loss of 1 million euros would usually carry a prison term with no possibility of a suspension.

By Karin Matussek, Bloomberg, 18 March 2020

Read more at Bloomberg

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet

FREE CPD Wallet