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Former Warburg banker gets jail term in German fraud trial

© Reuters. A sign at the entrance of the headquarters of German Warburg bank is pictured in Hamburg, Germany October 1, 2020. REUTERS/Fabian Bimmer/Files

BONN (Reuters) – A former banker was handed a 3-1/2 year jail sentence on Wednesday for his part in Germany’s biggest post-war fraud, a scam that involved scores of banks and investors engineering multi-billion-euro trades to make bogus tax claims.

The banker, identified as Detlef M., in line with court reporting practices in Germany, is a former employee of M.M. Warburg group, part-owned by one of Germany’s oldest banking dynasties. He is the second person to receive a jail sentence for trading activity that thrived during the years after the financial crash and cost Germany more than five billion euros ($5.72 billion).

The fraud involved trading shares rapidly around a syndicate of banks, investors and hedge funds to give the impression of numerous owners, each entitled to a bogus tax rebate.

Experts believe most of the money lost through the so-called cum-ex trades will not be recovered.

The trial followed a years-long probe into the sham trades amid a public outcry over the government’s failure to stop the scam.

The judge Roland Zickler found the banker guilty of two counts of tax evasion. The judge said that as managing director of a Warburg investment company he had helped set up two funds to profit from the transactions that took place during 2009-2010 to the detriment of public coffers.

Detlef M. said it was the “the biggest mistake of my professional life”. His lawyers said that he didn’t personally enrich himself and are considering how to proceed.

A spokesperson for M.M. Warburg said in a statement that the ruling had “no immediate impact” on Warburg Bank and the subsidiary where Detlef M. worked.

In the first major criminal trial for the fraud, two British bankers were handed suspended jail terms and one a 14 million euro penalty in Germany two years ago.

Last June, the court sentenced a different former employee of M.M. Warburg to more than five years prison.

The cases have been closely followed in London and Frankfurt, where much of the trading was organised, according to bankers and court documents.

($1 = 0.8747 euros)

Former Warburg banker gets jail term in German fraud trial

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