Tax probe pushed MM Warburg to worst crisis since Nazi era, banker says

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A German private banker on trial for allegedly arranging a €280mn tax fraud has accused prosecutors of botching their probe and plunging the 225-year-old lender into its worst crisis since the Nazis forced out MM Warburg’s Jewish owner in the late 1930s.

Christian Olearius, the 81-year-old co-owner of the Hamburg bank, on Monday used his first personal statement since the trial started last month to allege prosecutors had leaked incriminating details from their investigation to the press. Olearius has denied all charges.

The trial of Olearius, who has links to German chancellor Olaf Scholz, is the latest in a number of cases linked to the “cum-ex” scandal, a dividend tax scam that exploited a flaw in the German tax code. Investors used the trades to trick authorities into refunding dividend tax that was never paid.

On Monday, Olearius said that the cum-ex saga had exposed the bank to “enormous financial damage”, comparing the crisis to the bank’s situation in the Nazi years.

In 1938, its Jewish owner emigrated to the US, and a year later his stake in the lender was seized by the Nazis. “Our history-rich bank overcame the prosecution in 1938 thanks to the efforts of German friends,” he said. Today, he argued, the bank was facing “such a dangerous situation that its present set-up is at risk”.

Olearius accused prosecutors of conducting a “shallow, flawed and biased” investigation, and stated that the charges against him were based on “insinuation, repetition and speculation”.

Warburg took part in cum-ex transactions between 2007 and 2011, while Olearius was chief executive and then chair.

The trial centres on what Olearius knew about the trades. Cologne prosecutors allege that he was fully aware of the fraudulent character of the transactions, which were only profitable because of the tax scam, and that he later lobbied Scholz — then mayor of Hamburg — in an attempt to avoid the bank having to repay tax refunds linked to the cum-ex trades.

Olearius denied that he was aware of the criminal nature of the deals, claiming he did not fully understand them and assumed that the bank was taking part in legal transactions designed to lower the tax on dividends.

If found guilty on all charges, he could be sentenced to up to 10 years in jail.

Germany’s financial watchdog, BaFin, forced Olearius and other family members to give up operating roles at the bank and insisted their voting rights were transferred to a trustee. Olearius and co-owner Max Warburg have already paid €200mn from their personal fortunes to compensate for the tax damage caused by the bank’s role in cum-ex transactions.

MM Warburg Bank and BaFin declined to comment. The trial continues.