Bonn The defendant comes dressed in one color. His jacket, his shirt, his neatly cut hair – everything is gray. Christian S., 77 years old, doesn’t change his face when he takes a seat in the dock of the Bonn Regional Court on Tuesday morning. His defense attorney sits next to him.
In front of him, behind a plexiglass, the presiding judge Roland Zickler has settled down. The accused will not confess or speak for the next few hours. Christian S. answers many questions from the judge or the public prosecutor with a nod or a shake of his head. When he speaks, he is brief.
The defendant’s opinion about this trial can also be heard unspoken: It shouldn’t even exist. For many years, Christian S. was the general representative of the Hamburg private bank MM Warburg. The money house enjoyed an excellent reputation for decades, also far beyond the borders of the Hanseatic city. It is the largest owner-managed private bank in Germany. The accused considers the accusation of the public prosecutor’s office that Christian S., as their general representative, helped to cheat the state for 325 million euros, is absurd.
And yet he has to sit here now. The public prosecutor’s office in Cologne has drawn up a 283-page indictment over many years. The Bonn Regional Court approved them. From the point of view of the judiciary, Christian S.’s case is part of a whole series of alleged crimes.
Banks and investors misled the state by means of so-called cum-ex deals. Shares with (cum) and without (ex) dividend entitlement were traded in a circle. One participant paid a capital gains tax, two had it “refunded”. More than 130 banks from all over the world are said to have enriched themselves in this way from taxpayers. The total damage is estimated at twelve billion euros.
Christian S. is the third accused who therefore has to face criminal proceedings. Many more are to follow. In 2018, the Bonn Regional Court set up a new criminal chamber to cope with the flood of pending lawsuits. There is enough staff to carry out ten proceedings simultaneously. Of course, only one thing happened. It ended with a success for the prosecutor. Two stock traders were convicted of complicity and complicity in serious tax evasion.
Important process for the Warburg Bank
Christian S.’s employer was already affected during the first trial. The court had invited MM Warburg to be involved in the process because the accused carried out their business in part with the help of the Hamburger Bank. The court therefore imposed a fine of 176 million euros on the institute. The judgment is not yet final, the bank is taking action against it.
The trial against Christian S. is therefore of overriding importance for MM Warburg. If their general agent were convicted of aiding and abetting tax evasion, the lawyers of the Hanseatic League would fall behind in the further legal battle. The financial consequences would also be dire.
At the start of the trial against Christian S., the public prosecutor’s office leaves no doubt as to the central role he played in Germany‘s biggest tax scandal according to their investigation. The two public prosecutors Julian Kammin and Maic Vitt read from the indictment for two and a half hours. They meticulously trace how deeply the MM Warburg Group and its subsidiary Warburg Invest are said to have been involved in the incriminated business – and what responsibility their general manager allegedly carried.
Christian S. therefore made partly incomplete, partly incorrect information about the cum-ex transactions of his bank to the tax authorities. As a result, the aim of his actions was to obtain unjustified tax advantages on a large scale for the bank. In 13 independent acts, the damage to the taxpayer amounted to 325 million euros.
The public prosecutor considers Christian S. to be the bank’s most important decision-maker in the harmful business. “During the entire period of the crime, the accused occupied the interface between the retailers and the bank’s management level as a general representative, as head of the balance sheet, accounting and controlling department and as the ‘right hand’ of the management level,” the prosecutors put it. Christian S. was involved at all levels – and participated in the planning, approval and implementation of the business.
All of that sounds bad for Christian S. – and bad for MM Warburg too. The public prosecutor’s office often describes the accused as the “right hand” of long-time bank manager Christian Olearius. He is neither charged nor present at the trial – but that could change.
The public prosecutor’s office lists Olearius as “separately persecuted”. He was regularly involved in the meetings for the cum-ex talks. Olearius also maintained direct contact with Hanno Berger. The Frankfurt tax lawyer is accused several times. Any relationship with Berger is considered toxic in the banking scene today.
Christian S. is silent on all allegations on the first day of the trial. It quickly becomes clear to those involved that this procedure will be different from the first. There, the two defendants largely confessed, made extensive statements and apologized for their behavior. Apparently there will be no such admission by Christian S. in Bonn.
The court, says his defense lawyer Alexandra Schmitz, has no jurisdiction at all. The proceedings against Christian S. do not belong in Bonn because the alleged acts did not take place there. Christian S. worked in Hamburg, not in Bonn. Your client is denied a fundamental right – the right to a legally competent judge. The 12th Large Criminal Chamber in Bonn is a special court and also not competent.
What applies to the location of the trial also applies to the indictment. It is flawed in many points, says attorney Schmitz. It is nebulous why the public prosecutor speaks so confidently of a huge loss, when the responsible Hamburg tax authorities accepted MM Warburg’s tax returns, issued the tax assessments and refunded taxes. Only gradually did they claim back the capital gains tax. Whether this was legal is completely unclear. The bank has challenged the relevant decisions.
The public prosecutor sees this part of the dispute as part of the alleged act. The Hamburg tax authorities accepted MM Warburg’s tax returns, according to their declaration, because Christian S. had incorrectly or incompletely informed them about how the harmful cum-ex transactions actually took place. No defendant can use a successful deception as evidence that he is innocent.
Dispute with Deutsche Bank
The defense attorney denies her client’s guilt and complains that he of all people is in the dock. Where is Hanno Berger, asks Schmitz, without giving his name?
It’s an obvious question. The tax attorney mentioned many times in the indictment is often referred to by investigators as the “Spiritus Rector” of the Cum-Ex business – at MM Warburg as at many other banks. Although he has been charged, there is no trial. At Berger there are special hurdles in the way. On the one hand, he has been retreating to a Swiss mountain village for years, on the other hand, he has just received a message that he is unable to negotiate due to illness. Berger also describes himself as innocent, he calls the investigation against himself a great injustice.
Attorney Schmitz has a second suggestion for the cum-ex investigators: Please contact the Deutsche Bank turn. The largest German money house was involved as a custodian bank in the cum-ex transactions of MM Warburg – so it kept the shares that were traded in the incriminating transactions in the district. Here, says the defendant’s lawyer, was the real bad part of the business. Deutsche Bank should have withheld the capital gains tax that the dealers incurred in the deals in question. She didn’t.
If Deutsche Bank had fulfilled its duties, says Schmitz, you wouldn’t be in court today. Deutsche Bank sees it differently – both institutes have been fighting legal battles for a while. Regardless of this, says Schmitz, Christian S. is not criminally accused. Her client is “even today of the opinion that he was not guilty of anything”.
More: Why the new criminal process is increasing the pressure on Warburg co-owner Christian Olearius