German banker with links to Scholz charged in €280mn tax fraud

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The co-owner of one of Germany’s oldest and most prestigious private banks has been charged in court with arranging a €280mn tax fraud over his alleged role in a long-running dividend tax scam.

The trial in Bonn of Christian Olearius, the 81-year-old former chair of Hamburg’s MM Warburg, marks an escalation of the “cum-ex” scandal, with his links to German chancellor and former mayor of Hamburg Olaf Scholz under scrutiny by prosecutors.

In cum-ex trades, investors for years tricked tax authorities into refunding billions of euros of dividend taxes that had never been paid. A number of bankers and lawyers have already been sentenced to long jail terms in previous cases. Prosecutors in Cologne, Frankfurt and other cities have more than 1,500 additional suspects in the crosshairs of investigations that are expected to last for years.

The cum-ex trades exploited a flaw in the German tax code. Complex share trading around a stock’s dividend date could be used to justify reclaiming dividend tax that had never been paid in the first place.

On Monday, a panel of five judges in Bonn District court heard charges that from 2006, Olearius worked with others to organise such trades between 2007 and 2011, and that the bank received €280mn in illicit tax refunds.

“As personally liable shareholder, key owner and spokesman of the Warburg partners, [Olearius] personally oversaw all of the bank’s strategies in detail and approved all cum-ex trades which were initiated by him,” the prosecutors told the court.

The prosecutors allege that Olearius was fully aware that cum-ex trades were only profitable because of the tax scam and that he signed the bank’s fraudulent tax returns. If found guilty on all charges, Olearius could be sentenced to up to 10 years in jail.

On Monday morning, Olearius confirmed his personal details, but gave no personal statement. He has previously denied any wrongdoing.

The prosecutors also claim that Warburg deliberately set up investment funds to exploit the flaw in the tax code, and that Olearius misled tax authorities during an inspection. The prosecution also said that he had lobbied Scholz when he was mayor of Hamburg and that the two men had met several times. Prosecutors do not allege any wrongdoing by Scholz.

The city of Hamburg reclaimed the tax refunds only after it was ordered to do so by the finance ministry in Berlin, in a rare intervention by the federal government years later.

The meetings between Scholz and Olearius, which were initially not disclosed by the Hamburg government and became public only when the banker’s diaries were leaked to the press, have created a political scandal about whether the mayor had any role in Hamburg’s initial decision to waive the claim. The chancellor denies any illicit intervention and has said he cannot remember details of his meetings with Olearius.

Olearius stepped down as chair of Warburg in 2020. A year later, his son left the bank’s management board. After pressure from financial watchdog BaFin, Olearius also handed over voting rights linked to a 40 per cent stake in the bank to a trustee.

Warburg was founded in 1798 and is one of Germany’s most exclusive private banks with €4bn of assets under management. The bank said it had repaid €247mn to tax authorities, mainly from Olearius’s personal funds, and declined to comment further on the trial. In a statement on its website, it acknowledged that the “tax assessments of cum-ex transactions by Warburg group has turned out to be wrong”.

According to the bank, it made a post-tax profit of €46mn from cum-ex trades. It is going through a restructuring in the wake of the scandal and last year reported a post-tax loss of €34.6mn.

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