Vijaya Sankar, a former employee at asset manager Duet Group, confessed and issued an apology for his role in a Cum Ex tax scheme that cost Germany €92 million ($100 million).
(Bloomberg) — Vijaya Sankar, a former employee at asset manager Duet Group, confessed and issued an apology for his role in a Cum Ex tax scheme that cost Germany €92 million ($100 million).
Sankar was instructed to implement trading schedules at Duet, but never planned these trades himself, his lawyer Christian Pelz told a court in the Germany city of Bonn.
Pelz said his client knew that the profits in these deals came from tax refunds. People at Duet were very secretive about the tax element and tried to keep it covered, he said. Since so many reputable players from the financial industry took part in the deals, Sankar thought everything must have been proper, the lawyer said.
“He’s very sorry he got involved with these transactions,” Pelz said at the trial. “All in all, Sankar had a strange feeling because so many things around these trades were done in hiding.”
Sankar is on trial for helping organize Cum-Ex trades that led to €92 million in tax losses. He worked in Duet‘s back office where he helped setting up Cum-Ex deals in 2010 worth €11 billion for an investment fund set up by Varengold Wertpapierhandelsbank AG.
Cum-Ex, a strategy that took advantage of a loophole in how Germany collected dividend tax, first appeared in interbank trading long before it was adopted by hedge funds and the super rich by the mid 2000s. The tactic involved multiple parties claiming refunds on a tax that was paid only once. Germany changed the way it collected dividend taxes in 2012, thus blocking the practice. It is believed to have cost tax authorities at least €10 billion in total.
A long list of financial institutions were allegedly key to making the tax ploy work at Duet. The deals were allegedly set up with the help of of many financial firms, including Morgan Stanley, SEB AB and Investec Bank Plc.
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