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German Prosecutor’s Leaked Documents Implicate Investec (UK) Employees

Leaked Documents from the German Office of the Public Prosecutor are said to implicate some Investec employees in a scheme to get double refunds on tax.

1000 people around the world are currently being investigated in the biggest tax fraud case ever, which may have cost the European Revenue Service (like SARS but for Europe) more than 55 Billion Euros between 2007 and 2012.

55 000 000 000 Euros = R950 000 000 000

What was the Scheme? How did it work?

The supposed fraud involves shares buying and selling rapidly to different people who are part of the scheme before and after the declaring of dividends by a listed company. Then the members of the syndicate would claim back a withholding tax on the dividend that was paid out and here is where it gets dodgy they would do so twice because of a loophole that existed at the time.

there was an interpretation of the tax code which appeared to allow multiple people to claim ownership of the very same shares. So, more than one person could then claim a refund on tax that was paid

The supposed loophole existed because, at that time, there was an interpretation of the tax code which appeared to allow multiple people to claim ownership of the very same shares. So, more than one person could then claim a refund on tax that was paid once.

Prosecutors say that those who were involved (and did so many such trades and then multiple claims back from the tax authority) knew exactly what they were doing was wrong and were doing it specifically to enrich themselves at the cost of other taxpayers and the Union.

 

Due to a loophole it became possible for 2 people to claim a tax refund for the same transaction.

 

Mr. Hanno Berger (who came up with the scheme and seems to have led the group involved in such double rebate claims) says his actions were allowed by the loophole and were within the law. He does not feel he did anything wrong and merely used the system as it existed at the time to benefit in a way that was allowed. Now that the interpretation of the law has changed he no longer does any such claims.

Mr Hanno Berger was finally extradited from Switzerland and arrested in July 2021. 

Investec Plc Implicated

The part of the overall Investec brand that operates in the UK (and Ireland in particular) have been in the German prosecutor’s targets for several years since the supposed fraud was discovered and leaked documents show they have been busy trying to gather evidence against the brand and individuals.

It seems that Investec would give short loans of between EUR100 000 000 and EUR340 000 000 for the trades that resulted in the double rebates. These trades were happening again and again, to allow the scheme members to make the claims.

It has also been said that sometimes Investec themselves would act as a broker and carry out trades that were involved.

Allegations exist that Management at Investec Plc or perhaps other branches might have been active in facilitating the fraud which took place over many years.

Investec here in SA have been quick to mention the distinction between the different arms of the brand saying they are not involved and have mentioned that Investec is investigating the matter internally as well and are eagerly cooperating with authorities in their investigations. 

The German authorities are also investigating the possible roles played by UBS, Merrill Lynch, Macquarie and Deutsche Bank.

Authorities have now begun the process of charging those involved and this will no doubt continue over some time since so many parties are involved (and as some parties make deals to provide evidence against other parties or make settlement agreements).

Other Cases?

Investec has supposedly also been investigated by authorities in relation to being involved in a plan to defraud the German government using US pension funds, an evangelical church and a Jewish charity. Those investigations and allegations also supposedly relate to tax refund claims.

Time will tell if the fraud allegations are (1) true (2) if the authorities can successfully prosecute those involved and (3) if it was only a few individuals in the various banks who were involved or if they had the nod from the big bosses to do so in order to enrich the brand.

‘Those who run the show with such schemes seldom get into trouble’

Those who run the show with such schemes seldom get into trouble though. For example, famously only 1 person (Kareem Serageldin) went to prison in the USA for their role in the subprime crisis that saw the global economy thrown into total disarray and recession in 2008. Internationally only another 46 people got into serious trouble and most of those were in Iceland (25).