Prosecutors call for 5-year jail term for former Freshfields partner

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Freshfields Bruckhaus Deringer’s former global head of tax should face more than five years in jail for his alleged role in a multiyear dividend tax fraud, public prosecutors argued in court on Monday.

Ulf Johannemann, who until 2019 was the “magic circle” law firm’s most senior tax lawyer, has been on trial in Frankfurt since September over legal advice he gave to Maple Bank, a defunct German subsidiary of Canada’s Maple Financial.

From 2006 to 2009, Maple reclaimed more than €388mn in dividend taxes it never paid. Johannemann had issued legal opinions stating that the practice, which exploited a design flaw in the German tax code, was legal.

“Without the defendant’s legal opinions, Maple Bank’s cum-ex transactions would not have taken place,” prosecutor Stephan Wiens argued in court, adding that Freshfields at the time was the “leading legal adviser” for banks on the so-called cum-ex transactions. Maple Bank was one of 25 clients who were advised by Freshfields on the tax scam, the prosecutor said, putting the firm in a “unique position”.

Freshfields paid €10mn to settle criminal allegations against it three years ago and is not a defendant in the trial. It also paid €50mn to Maple Bank’s administrator to settle a civil lawsuit.

Prosecutor Hun Chai argued in court that Johannemann “was not just a small cog in a large machine”. Rather, he “and his tax department” were “one of the main driving forces” of the cum-ex tax fraud, the prosecution argued, and Johannemann had been fully aware that the bank’s practice was illegal but at the time thought that it was hard to uncover.

Prosecutors called for a jail term of five years and six months for Johannemann, just above half of the maximum sentence of 10 years but towards the upper end of previous convictions linked to the cum-ex scandal. The verdict and sentence will be delivered at the same time.

Johannemann, who earned close to €2mn per year at Freshfields, was taken in police custody in 2019 after he transferred €2mn in cash and shares as well as 9kg of gold to his wife in a move that prosecutors saw as potentially laying the groundwork for an escape. He was released from police custody on a €4mn bail and ordered to wear an electronic ankle tag.

Last month, the 52-year-old acknowledged in court that he had “totally failed” as a lawyer and had “glossed over the fact that my legal advice was used for illegal means”.

He disputed that he was fully aware of the fact that the bank had never paid taxes it reclaimed based on his legal advice, arguing that his client had misinformed him about the detailed nature of the trades. He said that he had considered it possible that Maple Bank did not share “the full truth” of its cum-ex transactions with him, adding that “I did not want to know it”.

In their final pleading ahead of sentencing by the court, public prosecutors on Monday criticised Johannemann’s statement, arguing that it came at a very late stage of the trial and was partially at odds with evidence uncovered in the trial.

Referring to internal emails, the prosecutor argued that there were “no secrets between Maple Bank and the defendant” about the details of the transactions, adding that the lawyer tried to obfuscate the crimes when tax authorities started to become suspicious. “Mr Johannemann has a tactical relationship with the truth,” prosecutor Hun Chai said in court.

Johannemann’s lawyers will give their view on the allegations next week. The court is expected to give its verdict by the end of January. The presiding judge has already indicated that a guilty verdict was “highly likely”.

Freshfields said in a statement that it continued “to work with the authorities within the boundaries of our professional obligations in an effort to learn from and draw a line under these matters”.