Commerzbank Frankfurt Offices Raided in Widening Tax Scandal
Commerzbank AG’s offices in Frankfurt were searched Tuesday as German authorities continued their investigations into a widening tax scandal involving multiple global lenders.
The raids are tied to controversial trading practice across the industry known as Cum-Ex, according to a person with knowledge of the matter who asked not to be identified in disclosing private information.
Cologne prosecutors confirmed they were conducting activities in the matter on Tuesday, without saying where or at what banks.
“We cannot comment on ongoing investigations,” said a spokesman for Commerzbank. “We are fully cooperating with the authorities and hope the matter is resolved as quickly as possible.”
The tax scandal has caught up multiple financial institutions, including Bank of New York Mellon Corp. and Societe Generale SA. Deutsche Bank AG’s headquarters were raided in the matter last year, with damaging images of police cars in front of the offices circulating across German media at the time. Two weeks ago, the offices of Deutsche Boerse AG, the operator of the Frankfurt stock exchange, were being searched as well.
To read more about the widening scandal ,click here https://www.bloomberg.com/news/articles/2019-09-02/the-german-tax-case-putting-the-entire-finance-industry-on-trial
The Cum-Ex transactions, spawned from various forms of dividend stripping, relied on the sale of borrowed shares just before a company was scheduled to pay dividends. This allowed more than one investor to claim a refund on a tax that was normally paid only once, effectively double-dipping at the expense of the state.
German newspaper Handelsblatt, which first to reported on the Commerzbank raids, said the lender is suspected of involvement in trading large blocks of shares around the dividend payout date. Investigators suspect Commerzbank did not itself collect capital gains, but indirectly benefited from the the practice, the newspaper said.
Shares of the lender briefly pared gains on the news, before resuming their climb. The stock traded 2.8% higher at 1:45 p.m. in Frankfurt.
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