“I should have known better”
Cum-Ex mastermind makes partial confession
8/8/2022, 3:38 p.m
As a pioneer of dubious cum-ex stock deals, Hanno Berger’s tax-saving models have made him rich. But his dealings also landed him in prison. Now he admits to having been warned since 2009. But it wasn’t just the money that attracted him.
In the billion-dollar cum-ex tax scandal, the best-known advocate of the dubious share deals at the expense of the state treasury, Hanno Berger, made a partial confession. The 71-year-old lawyer, who is accused of three cases of particularly serious tax evasion, admitted to the district court that he had acted with conditional intent from 2009. In that year, in a letter known to Berger, the Ministry of Finance made clear massive concerns about the method of tax planning advocated by the lawyer. Berger’s defense attorney, Richard Beyer, emphasized on the sidelines of the proceedings that before 2009 he saw no intentional action by his client.
The letter from the Federal Ministry of Finance in 2009 “should probably have been viewed as a turning point,” said Berger in his roughly two-hour statement. “I should have known better.” But instead, he and his staff would have concentrated on the formalities and the remaining gaps. A former federal prosecutor even warned him at this time: “The time for tax planning is over, he says. That should have given me food for thought.”
In the Bonn criminal trial, Berger is accused of three cases of particularly serious tax evasion in the period from 2007 to 2013. The defendant is said to have persuaded the private bank MM Warburg to start cum-ex transactions and helped set up the necessary structures. He is also said to have attracted bona fide investors. The tax authorities are said to have suffered damage of 278 million euros, from which Berger is said to have benefited (file number 62 KLs 2/20).
“Germany has opened up huge design options here”
In the business model, which had its peak from 2006 to 2012, banks, traders and investors pushed shares with (“cum”) and without (“ex”) dividend claims back and forth in a district transaction – it was a confusing game around the dividend record date, in which the tax authorities no longer had an overview and refunded capital gains tax, although the investors had not paid it at all. According to estimates, the German state lost an amount in the double-digit billions. Last year, the federal court ruled that cum-ex was a criminal offense.
In court, the lawyer described his path from bank auditor for the Hessian tax administration to consultant for tax savings models for banks and wealthy investors, from civil servant with salary level A15 to multiple millionaire. He was not only attracted by the money, but also by the legal challenges as a tax attorney.
The 71-year-old conceded that tax structuring, as he recommended to his clients as a lawyer, is frowned upon today. But that was different for a long time. He always got the same questions from his clients: How do I get my income tax-free? How do I get my assets transferred to the next generation in a tax-friendly way? “Germany has opened up huge design options here,” he said. Simply because the tax law is too complicated. And when one screw is turned, a new gap opens up elsewhere.
“We have to think of the clients”
The lawyer does not find his actions immoral. “Morals do play a role for me,” he said in court. As a lawyer, however, he must draw his clients’ attention to gaps in tax law. Whether the client uses this is then his decision. “We have to think of the clients. That was my credo. I pulled it off.”
The 71-year-old fled to Switzerland in 2012 and was extradited to Germany in February 2022. Since then he has been in custody. Berger is not only in court in Cologne, but also in Wiesbaden. There, the Frankfurt Attorney General accuses him of having obtained false certificates for a good 113 million euros of unpaid taxes from 2006 to 2008 (file number 6 KLs – 1111 Js 18.753/21). Dax shares with a volume of 15.8 billion euros were traded with other defendants via a complex system.