Morgan Stanley Raided in Frankfurt in Tax Fraud Investigation
(Bloomberg) -- German prosecutors are carrying out a raid on the Frankfurt offices of Morgan Stanley as part of their wider probe into the controversial Cum-Ex scandal that robbed tax payers of billions of euros.
Authorities are searching a bank and the homes of two suspects in a probe over Cum-Ex and related strategies, according to a spokesman for Cologne prosecutors. More than 75 officers are taking part in the action, he said.
Morgan Stanley confirmed that its premises were targeted and said the investigation relates to a “historic activity” and that the bank is “continuing to cooperate with the German authorities.”
Prosecutors in Cologne are probing about 1,500 people from the financial industry and are ramping up the pressure on international banks. They raided Barclays Plc's Frankfurt offices in March days after Bank of America Corp.'s Merrill Lynch premises were hit.
Cum-Ex was a trading strategy that siphoned off at least 10 billion euros ($10.5 billion) in government revenue. Named for the Latin term for “With-Without,” the deals took advantage of German tax laws that seemed to allow multiple investors to claim refunds of a tax on dividends that was paid only once. The nation moved to abolish the practice in 2012.
While dating back to more than a decade ago, the Cum-Ex scandal is still roiling the industry. Deutsche Bank AG is another major lender facing its repercussions. An influential advisory firm recommended over the weekend that company shareholders shouldn't sign off on management's actions for the past year, citing Cum-Ex as one of the reasons.
Germany's top court last week backed the retroactive application of laws to make sure the government can seize funds banks and other players involved in the scandal pocketed in the trades.
Morgan Stanley, next to a long list of other global investment banks, was mentioned as an alleged short seller in these deals in a search warrant Cologne prosecutors obtained in 2019 to raid Deutsche Boerse AG's Clearstream unit.
In the first indictment issued by Cologne prosecutors in the probe the same year, the bank is mentioned as a possible lender of shares needed to do the trades.
Why ‘Cum-Ex' Tax Dodge Casts Shadow on Global Banks: QuickTake
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