Four Warburg Bankers Indicted as German Tax Probe Escalates

(Bloomberg) -- Four M.M. Warburg & Co. bankers were indicted in Germany over their role in the Cum-Ex scandal, paving the way for another trial in a probe that has roiled the financial industry.

The indictment was filed by Cologne prosecutors at the same court that has already convicted two former London investment bankers, according to a person familiar with the case. It's the fourth case filed in the country where prosecutors are probing hundreds of people involved in the controversial trading strategy.

Scores of financial institutions have been caught up in investigations into Cum-Ex transactions, which allowed investors to seek multiple refunds on dividend taxes. As part of the previous trial, the court seized 176 million euros ($197 million) from Warburg, the amount of profit the private lender made from deals.

Court officials in Bonn, where the case was filed, declined to comment, as did Warburg. The bank has repeatedly said it never intended to participate in illegal share transactions, misinform tax authorities or seek unjustified refunds.

Cologne prosecutors said they aren't allowed to comment on the outcome of probes unless the suspects have been informed.

Cum-Ex trades, named for the Latin term for “With-Without,” took advantage of German tax laws and allowed multiple investors to claim refunds on a dividend levy that was paid only once. The practice ended in 2012 when Germany revised its rules, but Cum-Ex schemes may have cost taxpayers more than 10 billion euros.

Warburg's role was central to the first Cum-Ex trial in Bonn, which centered on more than 30 deals where managers at the Hamburg-based lender were involved, according to findings in that case.

A Private Bank Survived the Nazis But Cum-Ex May Break It

After scoring the convictions in March, Cologne prosecutors turned to individuals at Warburg.

Thursday's indictment is the first step. Prosecutors may seek to indict more officials later in the year, this time from the bank's leadership, people familiar with the probe have said.