Trial of 'Mr. cum/ex', the lawyer accused of the "biggest tax scandal" in Germany

Trial of 'Mr.  cum/ex', the lawyer accused of the "biggest tax scandal" in Germany

German courts are dealing these days with what has come to be called the “greatest tax scandal” the country has ever known. In the center of attention is now a defendant, the lawyer Hanno Berger, nicknamed 'Mr. cum/ex'.

The nickname comes from operations called cum/ex, which consist of the purchase and sale of company shares by coordinated investors who make these acquisitions before (cum) and after (ex) the payment of dividends. Associated with the payment of these dividends are taxes that, through actors like Berger, are supposedly successfully claimed several times from the German state.

Thus, the German treasury ends up returning several times the amount of money paid as taxes on dividends to Berger's clients, who was considered a "master" of cum/ex operations, according to the Frankfurter Allgemeine newspaper. Zeitung.

Berger, 71, has always defended his innocence. This Doctor of Law, who worked in the 1990s in public administration as a high-ranking tax collector specializing in the banking sector in Frankfurt, the financial capital of Germany, defends himself by saying that he limited himself to using the loopholes that had left the authorities.

Now, however, he is accused of being a participant in the "greatest tax theft in German history", according to Finanzwende, a civic organization dedicated to the protection of consumers in the financial sector.

The expert of said organization in financial crimes is Konrad Duffy, who sees in Berger, as he explains to“a key figure in the cum/ex operations scandal, because he made it possible to expand the group of people who participated in those operations.”

"Berger made it possible for private investors to participate in these operations, which were previously reserved, so to speak, for financial institutions," adds Duffy. Only in the trial that Berger attended this week in Bonn is he accused of having participated in the tax evasion of 278 million euros.

Despite defending the legality of the financial management that made it possible to enrich his clients – and his own – Berger fled to Switzerland in 2012 just when the German authorities became interested in his business, carrying out searches in his Frankfurt offices.

Following his career as a tax controller in the banking sector in Frankfurt, Berger worked for various German and international law firms. In 2010 he founded a law firm with his name and that of several associates.

Since 2007, according to the Prosecutor's Office, he would have already launched cum / ex operations. At that time, Berger worked for the banks HypoVereinsbank and MM Warburg. As explained by the weekly Die Zeit, Berger then proselytized what seemed like "a perfect deal." It was so “perfect” that when in 2019 those involved in another less relevant cum/ex case than Berger’s were sentenced in Cologne, the judge spoke of a “criminal masterpiece”. Such a crime, apparently, is only available to a few.

“Berger's case is the best known, because he is one of the best known figures. We must bear in mind that we are talking about someone who, first, worked for the German State, becoming someone very feared by many companies because he did his job very well collecting taxes, ”explains Duffy from Finanzwende.

“He was so good that he rose very quickly in the Civil Service, and this is what makes his case particularly notorious. In addition, it is also because he later changed sides and because he knew the laws and their weak points so well that he thought he found ways to avoid the law... although in reality he never did”, abounds this expert in financial crime.

Duffy alludes to the fact that Berger did not incur, ultimately, in taking advantage of a kind of legal vacuum. On the contrary, theirs would always have been criminal activities. Hence, according to the Prosecutor's Office, now it is not a question of proving that the cum/ex deals are legal or not in the Bonn trial. The question there is whether or not Berger was involved in these illegalities.

The information that accounts for the case in Germany these days does not seem to offer doubts about that participation. Moreover, as the Frankfurter Allgemeine Zeitung newspaper recalled this week, Berger himself defined himself in 2019 in an interview with the economic weekly Capital as the "architect" of a questionable business for which he now has to defend himself in court.

In the tax evasion case being tried in Bonn, if he is found guilty as charged, he could face up to ten years in prison. However, Berger not only has unfinished business with the courts in Bonn. Starting next June he is expected to start another case against him in Wiesbaden for other cum/ex operations.

According to the accounts they offer in the Finanzwende organization, Berger's is just one case of many that remain to be opened. Up to 10,000 million euros would have been stolen from the German coffers between 2001 and 2011 with cum/ex operations. An eventual exemplary conviction against Berger will not cover the work that the German tax authorities still have pending.

At the end of 2021, there were 103 open cases of cum/ex operations. There were only convictions in three of them.

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