A criminal trial against one of the key figures in Germany’s sprawling “cum-ex” tax scandal began on Thursday before a court in the western German city of Bonn.
The German lawyer Kai-Uwe Steck is accused of eight cases of particularly serious tax evasion between the years of 2007 to 2015, which allegedly resulted in tax losses for the German government totalling €428 million ($450 million).
Steck was a law partner of the lawyer Hanno Berger, who has been regarded as the driving force behind the 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 he is convicted, his role as a key witness is likely to mitigate the sentence.
In the fraud scheme, financial investors shifted stock shares back and forth around dividend payments dates in order to aggressively exploit an apparent loophole in tax law.
Germany was particularly badly hit by the scandal, although other countries were also impacted by the scheme.
By swapping shares with (“cum”) and without (“ex”) dividend entitlements back and forth, players in the scheme were able to receive tax refunds from the German government – despite having never paid the taxes in the first place.
Estimates have placed overall losses to the German government from the scheme in the tens of billions of euros.
The scheme peaked in popularity between the years 2006 to 2011. Revelations of the aggressive use of the “cum-ex” scheme by wealthy investors outraged the German public and caused a major scandal.
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