Diesel affair, Wirecard, Cum-Ex
These are the biggest economic scandals since the fall of communism
By Lukas Wessling
April 28, 2024, 6:15 p.m
Listen to article
This audio version was artificially generated. More info | Send feedback
Fraud cases are repeatedly coming to light in Germany that are difficult to understand because of their gigantic dimensions: whether it’s a diesel scandal or cum-ex fraud – millions are involved, many people are involved, and it’s usually difficult to come to terms with them.
Germany’s most diligent cum-ex investigator doesn’t like it anymore. At the beginning of the week it was announced: Cologne’s senior public prosecutor Anne Brorhilker is quitting and is moving to the “Citizens’ Movement Financial Transition” association. In an interview with WDR, she expressed her frustration with the fight against economic and financial crime in Germany: “Perpetrators with a lot of money and good contacts encounter a weak judiciary.”
In the history of reunified Germany, the responsible authorities and courts were repeatedly tested by scandals involving large sums of money and powerful actors. A selection:
Cum Ex
Those who want to know about it have known about its existence for a long time – in 2012 it will finally be closed: probably the largest tax loophole in German history. For years, investors at home and abroad had received multiple refunds of capital gains taxes from the state – even if they had only been paid once. This was made possible by the extremely rapid sale of shares with (cum) and without (ex) entitlement to the dividend. This meant that the Ministry of Finance could no longer understand who was entitled to the dividend at the crucial moment. The tax credit linked to the distribution could be claimed by several parties. According to estimates, the German state budget was defrauded of a double-digit billion amount by these cum-ex transactions.
These complex financial transactions would not have been possible without the participation of banks. One thing is certain: the Hamburg Warburg and the HSH Nordbank helped to exempt the German state. The public prosecutor’s office is investigating other German financial institutions, for example repeatedly examining rooms at Commerzbank and Deutsche Bank.
The Federal Court of Justice will not decide until 2021: Cum-Ex is tax evasion. At the end of 2022, bankers who brokered cum-ex transactions will be sentenced to prison for the first time. However, many cases remain open and the millions stolen have often not been paid back.
Diesel emissions scandal
The Volkswagen Group has been installing illegal software in its cars for years to manipulate emissions tests and whitewash the emissions values of diesel vehicles. In 2015, this practice became public through an investigation by the US Environmental Protection Agency. Fines, recalls, legal costs: the scandal has cost the company more than 30 billion euros to date.
As a result of the VW scandal, the German legal system is being expanded to include the “model declaratory action”. ADAC and the consumer advice center are able to use this instrument to obtain compensation payments on behalf of tens of thousands of VW customers. But it wasn’t just Volkswagen that cheated. The Federal Motor Vehicle Authority repeatedly calls cars with “impermissible shutdown devices” back: Mercedes, Opel, Porsche and Subaru – they are all affected.
This puts a strain on both customers and share prices. Investors want to be compensated. Several legal disputes are still ongoing. Volkswagen, for example, claims to have fulfilled its “capital market obligations”. Former CEO Martin Winterkorn is not aware of any guilt.
Panama Papers
In 2015, the media gained access to millions of documents from the Panamanian law firm “Mossack Fonseca”. Emails, contracts and invoices show how rich people have evaded taxes and laundered money on a large scale for decades via shell companies in tax havens.
The Panama Papers also attract so much attention because they expose the dealings of well-known personalities: for example, they shed light on the environment of Russian President Vladimir Putin. World footballer Lionel Messi is even convicted of tax evasion on the basis of this.
Used the services of the law firm Mossack Fonseca more than a thousand Germans. That’s why the German state can use the published data according to “SZ”. 150 million euros retrieve.
Wirecard
The financial services provider’s house of cards will collapse in 2020. Wirecard had reported almost two billion euros on its balance sheet, which actually never existed. After it became known, the share price plummeted and Wirecard filed for bankruptcy, becoming the first DAX company in history. Penalties against management follow.
Chief Operating Officer Jan Marsalek makes a spectacular escape and is now wanted by Interpol and is suspected of being in Russia. Wirecard boss Markus Braun is in custody and is being tried in Munich. The public prosecutor’s office accuses him of gang fraud, serious breach of trust and market manipulation. Braun rejects the allegations.
Wirecard’s former auditor EY is also in legal trouble. The company had controlled Wirecard’s financial statements since 2009. Insolvency administrator Michael Jaffé is demanding 1.5 billion in damages for the injured investors. The Federal Court of Justice rejected a lawsuit against the financial regulator Bafin at the beginning of the year.
Hypo Real Estate
In 2008, the German state made more than $100 billion available to save the floundering Hypo Real Estate (HRE) from collapse. The once largest German real estate bank was caught in the vortex of the international financial crisis and threatened to take the local banking landscape with it. A year later, HRE is nationalized – and with it all the bad loans and securities.
However, some investors do not feel relieved, but rather dispossessed. They demand higher compensation from the state – in vain. Demands for compensation are also being made from HRE’s management: they concealed the risks that the bank was dealing with and glossed over the situation for a long time.
But it is becoming increasingly clear in court: none of those responsible will be held responsible. ntv.de reporter Hannes Vogel stated in 2017 that breakneck risk management in Germany was “reprehensible, but not punishable.” A year later, the death of ex-HRE boss Georg Funke was reported; the case against him had already been dropped.