Osman Semerci, a once-rising star at Merrill Lynch & Co., appeared in a German court over charges he was involved in illegal Cum-Ex deals when he was a partner at London-based asset manager Duet Group.
(Bloomberg) — Osman Semerci, a once-rising star at Merrill Lynch & Co., appeared in a German court over charges he was involved in illegal Cum-Ex deals when he was a partner at London-based asset manager Duet Group.
Duet founder Henry Gabay also appeared alongside Semerci on Thursday in a Bonn tribunal on the first day of their trial. He will address the court with a personal statement on Friday, his lawyer said. The court also expects a statement from Semerci and his lawyers then.
Both men were charged last year for their alleged role in using the controversial strategy that exploited how Germany collected dividend taxes. The trades under review aimed to generate €215 million ($234 million) in illicit tax refunds of which €93 million were paid out, according to prosecutors.
“They knew the economic basis of that business model were refunds on tax that hadn’t been paid before,” prosecutors said when reading the indictment on Thursday. “Thus, they accepted that tax refunds were claimed that had no legal basis.”
In their opening statement, Gabay’s defense attorneys said their client trusted the legal advice Duet received that the deals were legal. The trial will show that he wasn’t involved in the details of the transactions and that the cooperating witness the prosecution relies on drew a false pictures of Gabay’s role while trying to whitewash themselves.
He was treated unfairly by prosecutors and the media, according to the defense.
“Our client has already been prematurely convicted by the press,” Christian Froeba, his attorney, said in court. “He’s become the face of cum-ex. The fallout was, in a word, devastating.”
The former Duet partners are among 1,800 finance professionals from around the world under scrutiny in the tax scam that cost Germany at least €10 billion in lost revenue. Named for the Latin term for “with-without,” the deals took advantage of laws that seemed to allow multiple investors to claim refunds of the same dividend tax.
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Semerci and Gabay were indicted together with co-founder Alain Schibl and a former back-office employee, Vijaya Sankar. Schibl’s case was separated and it’s unclear when it will start. Sankar stood trial earlier this year and was given a suspended sentence after apologizing for helping to set up the scheme.
Presiding Judge Frederik Glasner whose chamber of three judges already delivered the verdict against Sankar, said he and his colleagues will look at this trial with a fresh view and won’t infer anything from that previous case.
Cum-Ex was first introduced to Duet, a two-decade-old multi-strategy firm that invested in everything from real estate to commodities, in 2008 by Salim Mohamed, one of many former Merrill Lynch bankers looking for new jobs during the financial crisis.
Mohamed declined to appear as a witness in the trial, citing his legal privilege as a suspect in a criminal probe, Judge Glasner said at the hearing in Thursday.
The Duet probe started around 2016 but was first disclosed in the summer of 2020, when Gabay was arrested in the south of France and extradited to Germany. He posted €3 million bail and was released. In September 2020, Semerci and Schibl showed up voluntarily in Cologne and posted €2 million each to avoid being taken into custody.
(Updates with lawyer statement in fifth paragraph)
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