Macquarie Group has disclosed 60 of its current and former employees including chief executive Shemara Wikramanayake are now suspects in an investigation into an immense tax evasion scheme in German dividend trading.
The tally of potentially implicated staff has more than doubled from a previous approximated figure of up to 30, as stated by the bank in 2018.
The tax scandal, which used “cum-ex trading”, allowing investors to reclaim tax they didn’t pay, was said to have cost the German Treasury an estimated US$30 billion (around $43.8 billion).
The fraud scheme was discovered in 2017 by a collaboration between a number of European news outlets and last year, two British investment bankers, Martin Shields and Nicholas Diable stood on trial in Germany, accused of helping to engineer the transactions which resulted in substantial tax losses.
A number of banks across the European continent have been linked to the scandal – with it potentially reaching as far as Australia. The Macquarie staff are reported to be among 400 suspects being looked into by German authorities.
The group was a lender to a group of independent investment funds in 2011, which engaged in trading shares around the dividend payment dates where investors were seeking to obtain the benefit of dividend withholding tax credits.
The practice of cum-ex trading uses short sales around the dividend record date to create a share which appears to have more than one owner for a short period of time.
The principal objective of the transactions is to enable withholding tax on income from capital to be reimbursed or credited on more than one occasion, even though the tax had already been paid once.
Following a law change in 2012, the transactions are no longer possible in Germany, it is now considered fraud.
Macquarie told shareholders in an ASX release on Thursday that it would continue to cooperate with German authorities in relation to the German lending transaction in 2011.
Authorities designated the Macquarie staff as suspects within their investigation, in relation to short selling-related activities, with the bank stating most of the named staff are no longer employed at Macquarie.
A number of the employees had already been linked to the scandal, including former CEO Nicholas Moore.
Macquarie stated no detailed information has been provided regarding the named individuals, other than it relates to short selling-related activities. No current staff members have been interviewed to date.
The total amount at issue is not considered to be material, according to the bank, saying it has provided for the matter.
In 2018, Macquarie noted it was one of 100 financial institutions involved in the market, which it withdrew from in 2012.
A German litigation special purpose vehicle brought a claim against Macquarie Bank for the 2011 transaction it was involved in seeking €30 million ($48.4 million) in damages. It was also under investigation by the Cologne Prosecutor’s Office.
The bank strongly disputed the claim, noting it “did not arrange, advise or otherwise engage with the investors, who were high-net-worth individuals with their own advisers”.
“Many, if not all, had previously participated in similar transactions,” Macquarie stated.
The group said it had conducted a review at the time and it believed it was acting lawfully.
Macquarie had previously settled two matters related to dividend trading in Germany in 2006 and 2009.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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