Freshfields desires to finish its participation within the German Cum-Ex tax scandal with a fee of 10 million euros
Freshfields Bruckhaus Deringer has set itself the task of drawing a line under an unpleasant chapter for the company with a payment of 10 million euros to the German authorities in connection with the tax controversy.
At the heart of the matter is the largest tax fraud in Germany’s history, which underpins the resignation and subsequent imprisonment of Frankfurt-based Ulf Johannemann, Freshfields’ global tax chief, in 2019. He is charged with fraud related to his advice to the defunct German branch of Maple Bank over the legality of a system to reclaim taxes in excess of EUR 380 million that were never paid.
Cum-ex transactions allegedly took advantage of a loophole in German law to allow investors to reclaim dividend tax that was never paid. The practice is said to have started in the early 2000s and continued for several years, costing European taxpayers up to EUR 55 billion according to European Parliament estimates. Legal advisors are accused of playing a central role in exploiting the loophole.
In a statement released on Friday (January 29), a spokesman for Freshfields said: “The Frankfurt Attorney General (PPO) will no longer pursue the involvement of the law firm Freshfields Bruckhaus Deringer as a concerned party in the proceedings related to shares in transactions carried out by the Maple Bank on the dividend date.
‘The PPO stopped the OWiG (Administrative Offenses Act) against the company. The company made a voluntary payment of € 10 million to the German tax authorities.
“This is the result of a constructive dialogue with the PPO in coordination with the court and does not include an admission of guilt and / or liability. This is another step forward for the company as it seeks to address these legacies that date back more than a decade ago and focus on its future development. ‘
In late August 2019, Freshfields agreed to pay € 50 million in severance pay after the Maple Bank liquidator sued € 95 million. The company said in a statement at the time that it was “convinced that our advice always complies with applicable law”.
Freshfields will find it a relief to close this saga after some difficult years that have inevitably damaged the company’s reputation in Germany, one of its key markets and its largest single practice outside the UK.
The review prompted the company to set up an ethics committee for its German business last May.