Broker Faces Tax Trial Over Clients' $1.7 Billion Carbon Tradesby and
Consus unit accused of turning blind eye to clients' VAT scam
Six firms alledgedly cheated France of 283 million euros
A Polish carbon brokerage that handled contracts valued at 1.44 billion euros ($1.7 billion) in about six months for firms suspected of a tax fraud went on trial in Paris on Monday over its role as a possible accomplice.
Consus SA stands accused of turning a blind eye as six clients of its French arm cheated the country’s tax authorities out of 283 million euros, according to the indictment. Consus France sold more than 117 million tons of carbon dioxide for the clients on Bluenext, a joint carbon exchange set up by NYSE Euronext and France’s Caisse des Depots et Consignations, between the end of 2008 and June 2009.
The company is accused of overlooking its oversight duties as a broker, enabling clients to siphon the value-added tax due on the trades. Consus failed to ensure its clients’ tax affairs were in order as required and made payments into their offshore accounts in Cyprus and Hong Kong, according to the indictment document.
This trial is to determine why the clients went through Consus rather than other brokers, said judge Peimane Ghaleh-Marzban, pointing out that another broker, Orbeo, now known as Solvay Energy Services, was suspicious of their activity and halted transactions. “Why wasn’t Consus asking itself the same questions as Orbeo?" asked Ghaleh-Marzban.
The EU emissions-trading system, the world’s biggest cap-and-trade program for greenhouse gases, was hurt in the previous decade by the so-called carousel fraud, where emission-permit sellers known as “missing traders” collected the tax and then disappeared without giving the money to authorities.
In December 2009, Europol said the fraud had resulted over the previous 18 months in losses of around 5 billion euros in tax revenues for several European states. The EU agreed the following year to shift the levy to customers to thwart the fraud.
Consus’s lawyer Jean-Marc Fedida pointed out that neither Bluenext nor the Caisse des Depots were able to detect the fraud as it unfolded despite having an IT tool to visualize quota numbers, according to the indictment.
Torun, Poland-based Consus didn’t immediately respond to requests for comment on the trial, which is slated to last about a month. Bluenext was shut in December 2012 after the exchange failed to win a bid to run European Union permit auctions the following year.
The commissions that Consus collected from the firms are also criticized in the indictment.
“It could therefore well be that in paying the overcharge, the missing traders in this case were in reality paying for Consus’s complacency,” the French investigative judges said in the document.