A criminal trial against one of the key figures in Germany’s massive ‘cum-ex’ tax scandal began on Thursday in a court in the western German city of Bonn.
German lawyer Kai-Uwe Steck is accused of eight cases of particularly serious tax evasion between the years 2007 and 2015, which allegedly resulted in tax losses for the German government totaling €428 million ($450 million).
Steck was a law partner of lawyer Hanno Berger, who is considered the driving force behind illegal cum-ex transactions in Germany. Berger has previously been convicted for his role in the scandal and is currently serving his sentence in prison.
Steck, 53, played a central role in the prosecution of figures involved in the “cum-ex” scheme. He confessed to his role in 2016 and became a key witness in several trials.
If convicted, his role as a key witness will likely mitigate the sentence.
In the fraud scheme, financial investors moved shares back and forth around the dates of dividend payments to aggressively exploit an apparent tax loophole.
Germany was particularly hard hit by the scandal, although other countries were also affected by the scheme.
By swapping shares with (“cum”) and without (“ex”) dividend rights back and forth, players in the scheme were able to receive tax refunds from the German government – despite never having paid the taxes in the first place.
Estimates put total losses for the German government as a result of the plan in the tens of billions of euros.
The scheme peaked in popularity between the years 2006 and 2011. Revelations about the aggressive use of the “cum-ex” scheme by wealthy investors outraged the German public and caused a major scandal.
