DeuBa

Syllabbreviation for the Deutsche Bank. Whose co-chief, Jürgen Fitschen, has apologized for phoning Hessian governor Volker Bouffier (CDU) after the Frankfurt district attorney’s 500-man razzia on 12/12 (but before the Munich district attorney’s 10-man razzia on 12/20, the latest Leo Kirch-related search of DeuBa premises) to complain that the Frankfurt district attorney’s 500-man razzia may have damaged the Deutsche Bank’s image. Fitschen’s phone call has been roundly condemned by German politicians in a [2011 Anglicism of the Year].

One expert has speculated that Fitschen fell on his sword so that duarch Anshu Jain can remain unfired. I’m wondering how the press learned about the phone call.

Süddeutsche Zeitung journalist Klaus Ott said the Deutsche Bank was warned by the Frankfurt D.A. last summer. “There was a sort of yellow card, a dark-yellow card, half a year ago, and the Deutsche Bank knew that if they didn’t cooperate there would be a search.”

Update on 03 Apr 2014: A blogger reviewing Michael Lewis’s new book on high-frequency trading mentioned an interesting relationship between the Securities and Exchange Commission, Deutsche Bank and the global financial crisis of 2008:

“The SEC’s head of enforcement, Robert Khuzami, was general counsel for the Americas for Deutsche Bank from 2004 to 2009. And who did Lewis reveal to be one of the biggest instigators of the subprime short and related CDO sales? Gregg Lippmann of Deutsche Bank, patient zero of this strategy. Any serious investigation of CDO malfeasance would implicate Khuzami.”
—Yves Smith

(Doy! Bah!)

Unternehmensstrafrecht

“Corporate penal code.” Green party member Jürgen Trittin has called for Germany to create laws punishing companies rather than their individual employees who can be shown to have broken the law. Trittin said the USA has such a code and therefore the Deutsche Bank, Germany’s largest bank, will be punished more in the USA than it will in Germany. His is not the first voice or political party to call for a German penal code for companies. Meanwhile, in the USA, people are furious about the slap on the wrist HSBC received in a settlement, not a prosecution, for alleged terror financing and drug money laundering so severe the boxes of cash were too large to fit through tellers’ windows, with ~50,000 accounts alone at one Cayman Islands branch that executed “virtually no oversight.”

An 11 Dec 2012 Spiegel op-ed noted that three major British banks have been required to pay large fines in the USA this year: Barclays, Standard Chartered and now HSBC. “All three of these large banks are based in London. That is no coincidence. Although in the past few years the American justiciary has taken aim at institutions from other countries, such as Credit Suisse, ING and JP Morgan, the British banks play a special role. They are traditionally set up more globally than their competition and have had business ties, sometimes for decades, in countries that are classified as ‘rogue states’ today.” Spiegel’s Carsten Volkery added that HSBC’s stock price has gone up by 14% since the summer, and Standard Chartered’s by 20%.

(OON ter NAY men’s SHTROFF rect.)

Umsatzsteuer-Karussell

“Value-added tax carousel.” On 12 Dec 2012 there was a razzia at the Deutsche Bank in which 500 finance police searched its offices and employees’ apartments in several cities for evidence of German Umsatzsteuer tax fraud for CO2 pollution permits sold abroad. Again, the scheme seems to have been to pass the paper back and forth across borders until it was unclear whether the tax due in Germany had been paid, after which the bank printed receipts saying it had and asked the German I.R.S. to refund, in this case, the 19% V.A.T. for the supposedly foreign transaction. Süddeutsche Zeitung described it as the government’s advance payment of V.A.T. to dummy companies that never paid it back and then evaporated. Trade in CO2 pollution permits shot up between 2008 and 2010, and the German fiscus refunded billions of euros to such schemes, according to the Bundeskriminalamt.

The Frankfurt general district attorney, who has been investigating this since 2010, voiced concern that Deutsche Bank employees, among other things, did not report suspected money laundering as they were required to. Germany’s largest bank, DeuBa garnered at least 230 million euros via the scheme.

The first razzia looking for evidence in this carbon emissions trading carousel scheme was carried out in April 2010 (and an unknown person warned the bank the day before). In December 2011 a decision by the Frankfurt District Court [Landgericht] listed instances in which the Deutsche Bank apparently did not care to ask questions about its business partners. Journalist Klaus Ott described some of them in an article in the Süddeutsche Zeitung dated 30 April 2012: “A business account for a furniture store that wants to engage in emissions trading? A business account for a company that doesn’t have any offices yet? A C.E.O. who doesn’t speak German but signs German-language bank papers with no prior translation? No problem! And what about the risk management documents of the company bringing in the new partner? The bank isn’t interested, even though it is well known that something stinks in this industry.” Spiegel-Online reported that in one case a ten-minute conversation sufficed to set up this million-euro deal. People behind the scheme appear to have been located in London.

Update on 20 Dec 2013: Europe’s carbon emissions market is merely ~100 billion euros, Süddeutsche.de wrote, but the continent’s “more vulnerable” “scarcely monitored”  electricity and gas market is about nine times as large. It looks like the carousel tax scheme has been used there too, by Germany’s third-largest utility company EnBW but they’re not the only ones. Europol said that “criminals” used the carousel to avoid ~5 billion euros in value-added taxes in the carbon emissions market, but that the tax fraud may have been correspondingly higher in the bigger market.

The alleged electricity trading carousel was set up quickly, growing very large very fast. At EnBW, for example, tax auditors either found or made an in-house note that in 2011 “tax-free sales increased from circa one billion euros to ten billion euros within one year.” Germany’s F.B.I., the Bundeskriminalamt, was quoted as saying setting up the scheme required specialist expertise and in fact looked rather “organized.”

Süddeutsche.de indicated they learned these details from internal confidential papers from e.g. tax auditors in Karlsruhe and a central corporate I.R.S.-type office in Stuttgart [Zentrales Konzernprüfungsamt Stuttgart]. Europol, German prosecutors from multiple cities and German tax officials from multiple states are said to be investigating.

(OOM zots SHTOY err   car OO! sell.)

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