Frankfurt Prosecutors Probe Nine in Dividend-Fraud Case

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Nine people are suspects in investigations into controversial stock trades used to obtain tax benefits on dividends, prosecutors said as they revealed more details about raids at several sites, including Deutsche Bank AG offices.

Authorities searched homes and offices of several companies two days ago, Alexander Badle, a spokesman for Frankfurt’s General Prosecutors Office, said in an e-mailed statement Thursday. He didn’t identify any individuals or companies.

The suspects may have sought illegal tax credits totaling 43 million euros ($48 million) in the two cases, prosecutors said. Deutsche Bank said on Tuesday that its offices in Frankfurt were searched as part of the probe, which is directed at clients of the bank. None of its employees are among the suspects, the Frankfurt-based lender said at the time.

Several former Deutsche Bank employees who started their own company to process the so-called cum-ex trades are among the suspects, Norbert Gatzweiler, an attorney for another man caught up in the case, said on Wednesday. His client, a tax lawyer named Hanno Berger, has been under investigation since 2012 over advice he provided on the transactions. The deals were legal at the time and Berger did nothing wrong, Gatzweiler said.

Tuesday’s raids were conducted throughout Germany, Badle said. While the suspects filed tax papers to claim the refunds for trades made in 2008, they were denied by revenue officials, he said.

Cum-Ex Trades

The cum-ex transactions used loopholes in German tax laws that allowed a short-seller and the actual holder of shares to both claim tax credits on a dividend. In some cases, refunds were claimed up to five times over the same dividend payment. The strategy made use of tax certificates issued by the banks involved as custodians in the trades. Germany eliminated the controversial rules in 2012.

Frankfurt, Cologne and Munich prosecutors have been investigating clients and banks over the trading strategy. Munich investigators started a probe in 2014, targeting current and former employees of UniCredit SpA’s German unit.

UniCredit SpA’s German HVB unit has also been investigated in the Frankfurt probe. Prosecutors had raided the lender’s German office in 2012. HVB later reached a settlement with tax authorities over the issue.

HVB in 2011 had started an internal investigation of cum-ex trades at the bank made between 2005 and 2008. When the review was completed last year, the supervisory board said the report revealed misconduct by individuals in the past.

HVB won’t comment beyond last year’s statement, Marion Nagl, a spokeswoman for the lender, said Thursday.

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