Right at the beginning of his statements, the accused Hector F. burst into tears. He has waited many years for this day, now it will soon be behind him. But the price for this is a confession. A confession to the role the former Deutsche Bank employee played in one of Germany’s biggest VAT fraud cases. A case that was not only so sensational because of the sums evaded, but also because the largest German financial institution was at the center.
In the end, Hector F. will get away with a suspended sentence of 1.9 to two years, but will also have to pay 1.8 million euros. So it provides for an agreement with the court. “I expressed concerns, but did nothing,” he said on Monday before the Frankfurt Regional Court. “That was a serious mistake.” “As a member of a gang” he is said to have participated in a sales tax carousel with CO₂ certificates and helped to evade 145 million euros. The Attorney General accuses him of serious tax evasion, but could not prove any collusion with backers.
With the trial against Hector F., which began on Monday and is only scheduled for two days of trial, those involved are probably writing the final chapter of this mega-fraud twelve years after the investigation began. A total of eight ex-managers of Deutsche Bank will have been in court in Frankfurt, including F. One received a three-year prison sentence. Several accomplices and backers were convicted and sentenced to long prison terms. 99 years and a month if you add it all up. The public prosecutor’s office and Hesse’s tax investigators recovered more than 400 million euros for the Treasury, far more than originally allotted to the Hessian tax authorities, mainly paid for by Deutsche Bank – because there was usually nothing more to be got from the front companies. They were lucrative criminal cases. A success, but also a drop of bitterness in view of the many allegedly undetected cases of VAT fraud in the EU.
First in London and later in Frankfurt, traders from Deutsche Bank bought and sold CO₂ pollution rights together with criminal businessmen from half of Europe and the Middle East in 2009 and 2010 until the tax authorities lost track. The certificates, actually an incentive for energy suppliers to save emissions, were a kind of turbocharger for this scam, as trading was much less complicated than with real goods. In the end, the tax authorities reimbursed sales taxes that no one had previously paid. When the British tax authorities intervened, these transactions were no longer possible in the bank’s London branch from 2010, which is why the money house moved trading to Frankfurt without further ado. There the merry-go-round continued to turn for several months until the control center stopped it.
At the time of the first search, those affected had known about it for a long time
The Co₂ affair was also one of the largest cases of organized tax evasion in Germany – at least until the cum-ex deals were processed. The two raids in 2010 and 2012 are legendary. During the second search, several hundred public prosecutors, police officers and tax investigators also ransacked the bank’s headquarters, and then boss Jürgen Fitschen complained to Hesse’s Prime Minister Volker Bouffier. During the first search, those affected had known for a long time when the investigators demanded admission. The bankers had a tip received, as tapped telephone conversations suggested. In the investigations it came later too Frictions with the bank, because the authorities assumed that the money house had withheld data from them. There was even a suspicion of frustration, as a witness from the tax investigators recalled in court on Monday.
Why didn’t anyone intervene? Possibly because they didn’t want to miss out on the earnings, hoping for bonuses and promotions, or “because we’re so greedy” and earn “a hell of a lot of money” like a banker in a phone call brought to the point. After the financial crisis, income from derivatives collapsed – the Co₂ deals came at the right time. And so apparently nobody wanted to end the deals, despite many warnings about criminal business partners. “No one really did anything about it, that was the general mood in the bank at the time,” says Hector F. If he had rebelled, he – who was responsible for selling the certificates at the time – would have lost his job, he says.
The bank saw itself as a victim
VAT fraud is an ongoing problem in the EU, with many cases going undetected. It is all the more astonishing what the investigation group “Odin” has achieved with the Hessian tax authorities and the Frankfurt public prosecutor’s office. They exposed one of the largest networks of scammers. Professional criminals who robbed the tax authorities for two years estimated more than 800 million euros in tax damage. And actively supported by Deutsche Bank.
While the money house saw itself as a victim of a gang, years later employees kept asking about the responsibility of their superiors, such as the recently deceased former co-boss Anshu Jain, who headed the investment bank at the time. Or even to a former boss of Hector F. The events did not harm her career for a long time, in 2019 group boss Christian Sewing even promoted the manager to head of the internal bad bank. The events Sewing should not have been completely unknown: as a former legal director he had them Research on Co₂ in 2015 directed. The bank said it had fully investigated the matter.
But questions still remain unanswered, as the presiding judge Moritz Rögler indicated on Monday. “We won’t be able to hear Mr. Jain anymore,” he says. But there is enough that could still be clarified here, also as far as the London side is concerned. Judge Martin Bach made a similar statement in June 2016 when he announced his verdict on the six former Deutsche Bank bankers. Her superiors would have favored the system – through a “risk-affirming culture”. And the “failure of all security mechanisms”.