Deutsche Bank AG’s head of tax for continental Europe is among the suspects in Frankfurt prosecutors’ investigation of carbon-emission certificate trades, two people familiar with the matter said.
The executive and a tax-compliance manager are being probed in the case over evading value-added tax, said the people, who declined to be identified because the suspects haven’t been disclosed publicly. German financial regulator Bafin is also looking into the matter, it said.
Investigators in December raided Deutsche Bank’s Frankfurt headquarters, arresting five employees. Prosecutors are also probing co-Chief Executive Officer Juergen Fitschen and Chief Financial Officer Stefan Krause, who signed tax returns related to value-added tax on the certificates.
Deutsche Bank spokesman Ronald Weichert said the bank was cooperating with prosecutors and declined to comment on the identity of any suspects. An e-mail and call to the tax executive weren’t immediately returned.
Prosecutors are investigating whether the handling of the certificates led to tax evasion. They have extended the case to also look into whether, in the course of the investigation, some people at the bank obstructed justice or violated money-laundering rules.
The lender, its executives and employees have denied the allegations. The five arrested employees were released within a week. Prosecutors are investigating about 190 suspects in the case, among them 25 are at Deutsche Bank.
Bafin asked Frankfurt prosecutors to give them access to their case files, according to one of the people. While prosecutors denied the request, the regulator asked the bank for information updates on any developments, the person said.
Under German banking laws, prosecutors can refuse Bafin access to protect suspects’ privacy, especially if the findings aren’t verified.
A request for information is the first step the regulator takes when an issue needs closer scrutiny. If Bafin finds more review is warranted, it can order a special probe, such as the financial regulator’s current investigation into the Deutsche Bank’s involvement with the rigging of benchmark interest rates.
Bafin spokesman Sven Gebauer declined to comment as did Guenter Wittig, a spokesman for Frankfurt prosecutors.
Deutsche Bank shares fell less than 1 percent to 34.16 euros in Frankfurt trading today.
Prosecutors started a probe in 2009 into what they claim is a value-added tax evasion scheme exploiting the European carbon-emission certificate trading system. Seven Deutsche Bank employees working in emissions-allowance trading were named as suspects and the bank was searched in April 2010.
Six managers at small emissions-trading companies were convicted in the first trial related to the probe in December 2011 and received sentences of more than seven years in jail. Deutsche Bank, which bought the securities from the companies, should have known the trades were illegal, the court said.
The tax executive now under investigation testified in that case, saying the bank was discussing the certificate business with German tax authorities in December 2009 and January 2010 and received no indication the bank’s trades were tied to fraud.
After the 2010 raid, Deutsche Bank conducted its own probe and said it would cooperate with the authorities. Prosecutors later complained the bank didn’t make all its findings available, according to two people familiar with the matter.
Deutsche Bank didn’t hand over the London part of its review because under U.K. law the findings are protected by attorney-client privilege, the people said.
The lender said in December that Fitschen and Krause are under investigation because they signed value-added tax statements for 2009 that prosecutors claim were wrong. The document was voluntarily corrected in a way that rules out any violations, the bank said. Prosecutors say the correction came too late, the lender said.