Frau Fraudbuster: German bankers and traders trembling at hotshot lawyer’s 10-year investigation

Every time she is seen on the high-speed train to Frankfurt from her base in Cologne, Anne Brorhilker terrifies some of the world’s largest investment banks. As the local lead investigator in Europe’s largest tax scandal, she regularly travels on the Intercity Express that races towards the heart of the German financial center.

Within its steely, bespectacled landmarks are the imposing glass and concrete offices of the city’s major international banks. Normally one of them is ambushed by the police at dawn the next day.

Although the scandal, known as Cum-Ex, has unfolded in Germany, it is poised to rock the city, where banks and traders are suspected of being deeply involved in the massive tax scam.

In Germany, the British Barclays, Bank of America Merrill Lynch, Morgan Stanley, BNP and Nomura are among those under investigation, as well as leading law firms and accountants.

So far, prosecutors have conducted at least 13 raids since March 2022 — and the pace of investigations is expected to increase even further.

Germany is at the center of a European investigation into Cum-Ex, a controversial trading strategy that exploited a loophole in the way dividend tax was collected, allowing multiple investors to claim refunds for a tax paid only once.

The alleged perpetrators were financial traders – many of them based in London – and their clients. The losers were the taxpayers. In the case of Germany, which halted dividend tax trading in 2012, up to £10 billion could have been lost to public coffers.

Brorhilker, 50, has been in the Cum-Ex case for a decade. Its operation in Cologne has become by far the most ambitious of the three regional investigations in Germany. She now oversees 120 investigations involving 1,700 suspects, most of whom are in London.

As the German con artist relentlessly pursues her prey, the number of suspects continues to rise.

Barclays employed 124 bankers who were later named as suspects. According to financial news channel Bloomberg, the costs could come as early as next year. The bank declined to comment.

Officials in the Netherlands, Finland and Belgium have launched their own investigations, while Denmark has filed about 500 civil lawsuits related to dividend tax refunds.

Danish authorities last week won the right to prosecute an alleged £1.4 billion tax fraud case in London’s High Court, after the Supreme Court ruled the case could be heard in England.

Lawyers say the ruling by England’s highest court will have profound implications for other Cum-Ex cases being heard.

“This statement will resonate around the world,” said Aziz Rahman, senior partner at financial crime specialist Rahman Ravelli.

“This should be seen as an important victory for the Danish tax authorities,” Rahman added. ‘It will also provide reassurance to other countries seeking to recover huge sums paid thanks to Cum-Ex.’

The multiple defendants in the Danish case include British hedge fund trader Sanjay Shah, who ran the now-defunct Solo Capital. They all deny the allegations. Shah’s representative was contacted for comment. In another development, last week an ex-Fortis banker was sentenced to three years and three months for his role in the trading scandal.

The German, who can only be identified as Frank H, was found guilty by a Frankfurt court of siphoning off £45 million through dodgy Cum-Ex deals.

The Dutch bank ABN Amro, which took over the part of Fortis that carried out the transactions, has returned the money to the tax authorities.

The conviction brought the number of people found guilty so far to at least 14.

German authorities have also successfully recovered around £2.7 billion – excluding payments recovered through a series of criminal proceedings.

Several other high-profile investigations continue.

This includes that of Henry Gabay, founder of the now defunct London asset manager Duet Group.

He recently told a German court that he was innocent and that the “devastating” Cum-Ex charges against him were based on the lies of his former business partners. “My whole life is in ruins,” Gabay told jurors. He claims he relied on legal advice that finalized the deals at the time.

“If I had had even the slightest idea that the legal opinions did not cover the whole picture and the risks, I would never have allowed these deals to be done under the Duet umbrella,” he said.

Suspect: Hedge fund trader Sanjay Shah

Gabay’s lawyer said his client “deeply regrets” that “reputable” banks and lawyers used his hedge fund to carry out deals now considered illegal.

Also in a separate case is Christian Olearius, the former boss of the prestigious private bank MM Warburg, which was seized by the Nazis in the late 1930s. Olearius, 81, is on trial for allegedly organizing a dividend tax fraud worth £245 million. He has denied all allegations. Olearius, who has ties to German Chancellor Olaf Scholz, recently accused prosecutors of plunging the 225-year-old Hamburg bank into its biggest crisis since the Nazis forced out the Jewish owner of MM Warburg in the late 1930s.

A court recently awarded Olearius five-figure damages after it emerged that his personal diaries had been seized by prosecutors investigating the case and that incriminating details from their investigation had been leaked to the media.

Olearius accused prosecutors of conducting a “superficial, flawed and biased” investigation and said the charges against him were based on “insinuation, repetition and speculation.” He faces up to 10 years in prison if convicted on all charges.

Olearius and co-owner Max Warburg have already paid £175 million from their personal fortunes to offset the tax damage caused by the bank’s role in Cum-Ex deals. MM Warburg declined to comment.

A new £38 million courthouse dedicated to hearing cases brought by Frau Brorhilker will open next year in the Bonn suburb of Siegburg. That could be useful for the London-based defendants, as Siegburg is connected to Frankfurt airport by a high-speed line, meaning they can fly in and out on trial days.

Suspect spotters, take note.