A group of men managed to plunder Europe for E60trillion. They are known as cowboy traders, seasoned tax lawyers and mathematical genius. They were working in heart of the City of London.
In Britain, the so-called “cum-ex” scandal, a complex, derivatives juggling act, was not mentioned on BBC News or the Tory controlled Press. One reason, headlines were full of Brexit; the other assumed reason is too many ‘Elite’ names involved. The fraudulent scheme was discovered in 2017.
However, in Europe the French Newspaper, Le Monde, called it the “robbery of the century” and the news made an impact as much as Brexit on the opinion of Britain.
The Dutch media labelled it as “organised crime in pinstriped suits” and stated that they welcome Brexit.
Germans welcome Britain exit from EU hoping it could weaken interference of London Investment Banking on Europe Finance.
A British former investment banker who was part of the development of the scheme gave the public an insight of the scheme and what encouraged the men to use it.
Martin Shields, spoke at a reginal court in Bonn, Germany, where he is one of the two former bankers on trial for 34 serious tax fraud between 2006 and 2011. He described how London banking system brought in the brightest scientists from the country’s top universities to use them to improve their profit margins. Nobody ever mentioned morals and/or legal consequences.
Mr Shields, 41, explained further “This was the environment at that time; a financial industry that - at least as far as I could see – was geared towards maximum profit optimisation.”
“One tool to achieve this goal was tax optimisation: avoiding taxation as far as possible – and taking advantage of any opportunities that could be found or created. This was not the clandestine approach of a few. Rather, I saw it as the clear and openly communicated expectation of most major banks and their customers.”
Mr Shields was known as a maths prodigy at school and was offered a junior position at Merrill Lynch after position engineering, economics and management at Oxford University; the trading room floor offered him a thrilling, dynamic environment. From 120 engineers in his group at university only five went into engineering.
Dressed in a dark-blue suit used his banker’s jargons and talked the court through “cum-ex ecosystem” a labyrinthine trade chains he dealt with and controlled.
Prosecutors stated it cost the German state E450m. A translator struggled with the City trader jargon to keep up with it.
As expected, the financial rewards were out of this world. Shields practised cum-ex trades through Balance Capital based in Gibraltar. His personal income was E12m.
Shields and his wife purchased in 2010 a £9,7m mansion in Chelsea’s Egerton Crescent. They bought another property at Edward Terrace on Shrewsbury Road, Dublin, the most expensive residential street.
Shields did not reply to the charges of serious tax fraud at court, but he said later he started to regret his action; money taken by the devised schemes could have been available for building houses, roads, hospital and so on.
He told the court: “I often ask myself whether if I had my time again I would do things differently. Knowing what I know now, the answer is obvious. I would not have involved myself in the cum-ex industry.”
After a struggle, he decided to cooperate with the investigation which could reduce his 10-year jail sentence. The other accused banker Nick Diable, 39, worked with Shields for Germany’s fourth largest bank HypoVereinsbank (HVB) will give a testimony during the trial. The trial will last until next year.
Shields cum-ex trades were dealings on an “industrial scale” during the beginning of 21st century. Just to give you a glimpse into the underworld of banking it involved a vast number of banks, companies, brokers, lawyers and financial advisers. How huge and complicated the whole scheme was shows it took at least 12 transaction.
The banks and financial institutions mentioned during two days’ court sessions also included Clearstream AG, 100% owned subsidiary of Deutsche Boerse AG. It will process the dividend compensation payments and Shields suggested to keep the cum-ex bonanza going; German Lawmakers tried to close a loophole in 2007.
The court was packed with lawyers from high-profile banks and financial institutions, If the Judge in Bonn rules that cum-ex trades did not only use legal loopholes but the law at that time it will be one of the biggest scandals in the financial history.
Mora was the director of Cinnamon Club, Indian Restaurant, where politicians and business’ people were meeting, and cum-ex deals made. Die Zeit named the restaurant “cum-ex lounge”. Moira denied all wrongdoing. According to him all his trades were approved by legal experts.
Another investigation held in Cologne for the same scheme. Prosecutors probing into 56 cases with 400 suspects about cum-ex deals. They were charged with the scheme in Denmark.
Estimated losses include an estimated €31.8 bn Germany, at least €17bn for France, €4.5bn in Italy, €1.7bn in Denmark and €201m for Belgium.
Cologne investigation’s prosecutors state cum-ex wasn’t a legal tax trading strategy. It was a white-collar organised crime, one of the biggest in history.
Hanno Berger supposed t6o be the architect of the scheme. A well -known tax officer became a tax lawyer whose clients are the owner of BMW and ADIDAS. Berger was named as the mastermind and was accused of tax fraud in Wiesbaden. He maintains his dealings are lawful and the case had not appeared in court so far.
Paul Robert More, 51, Kiwi. Mora had knowledge of tax law when he joined investment banking in the City of London. At HypoVereinsbank he had his own investment bank Balance Capital and Arunvill, MorThey and been called “the men who plundered Europe”.
Sanjay Shah, a British-born son of Indian immigrants from Kenya is the key figure for investigations in Denmark, where prosecutors say he defrauded the treasury to the tune of €1.3bn, mainly through his hedge fund Solo Capital LLP, by copying the system used by Berger. Shah has denied any wrongdoing.
Unfortunately as always, we hear about great News and then it vanishes again without any update or result. It happened in this case as well; therefore we never heard of the outcome.
