Global Tax Chief for Major Law Firm Sentenced to Jail

[wserra]

A few days ago, a German court sentenced Ulf Johannemann, the former global tax chief for the international "Magic Circle" firm Freshfields Bruckhaus Deringer, to 3.5 years in jail for facilitating a huge evasion scheme. Known generically as a "Cum-Ex", the scheme involved rapid trading of dividend-paying securities in a way that hid the actual owner at the time the dividends were paid. Many parties would then claim capital-gains rebates for taxes that had actually only been paid once. One estimate places the loss to German taxpayers at €10B, which went into the coffers of some of the wealthiest players in the game.

Johannemann was charged with authoring expert legal opinions that provided cover for the banks and investors who participated. Showing that stupidity is not limited to the folks we usually cover, Johannemann claimed at his trial that he “glossed over the fact that my legal advice was used for illegal means” - doubtless he was shocked, shocked to find that out. The German judge was, not surprisingly, having none of it.

More details in an article in the Financial TImes.

[JamesVincent]

More details in an article in the Financial TImes.

Link requires a subscription. I found a Reuters article that also covered it.

https://www.reuters.com/markets/europe/ ... 024-01-30/

Money quote from the article:

"There was somewhat the impression that your regret was regret because you were caught, and not regret because you did something wrong," judge Werner Groeschel said at the sentencing.

[The Observer]

Somehow, a sentence of 3.5 years seems a tad low for this situation. I know it was non-violent white-collar crime but it is a bit hard to digest. Given that you have a competent, practicing attorney, partner in a renowned law firm, who knew that his planing and organizing this scam would not stand up in the bright light of day, it seems that he is getting a mere slap from the court. I am sure there are sentencing guidelines that allow for this type of sentence. But I am betting the attorney earned a great deal of monies in partnership fees in return. No mention that he got fined - I realize the firms got hit with fines but that was their fault for turning a blind eye to his activities. They may be able to get liability insurance to cover it.

No matter how you look at it, it stinks.

[wserra]

On average, western Europe incarcerates a far lower percentage of its population than does the U.S., and the length of the sentences for similar crimes is far less. My guess is that 3.5 years does not substantially deviate from the norm in Germany for financial crimes, even considering the huge tax loss. Moreover, western Europe's crime rate is significantly below that of the U.S. There's a lesson in there somewhere, although I'm honestly not sure what it is.

My interest in the story centers on who this guy was - the global head of tax practice for a leading international law firm. What could he have gotten out of this that he didn't already have? Other, of course, than jail time and disgrace.

[The Observer]

What could he have gotten out of this that he didn't already have?

Just more of what he already had. Humans have the ability to keep amassing things despite the obvious conclusion that they need no more. How many more sports cars did he want? How many women did he want on his arm? How much more prestige and power did he want? And how many times more did he want to stick it to the government and rub their noses in his success?

Apparently the sky is the limit. Which is why I think jail sentences and fines need to go up for individuals like this.

[Number Six]

This type of fraud is unusual in Europe. In the US it seems that the prosecution for tax crimes has a particular type of "fashion". I remember a meeting with the US attorney and our Congressman at Fairfield U. where the US attorney brought up potential prosecutions to gauge audience reaction as they know that their viability is based on how the people react to particular cases in their hit parades. In the US there seems to have been a substantial slide in rigorous prosecutions of "pure" white collar frauds; there is usually a significant society-damaging tie-in such as investment sleaze or drug offenses to have the government pursue tax fraud full bore and robustly.

[Pottapaug1938]

What could he have gotten out of this that he didn't already have?

Just more of what he already had. Humans have the ability to keep amassing things despite the obvious conclusion that they need no more. How many more sports cars did he want? How many women did he want on his arm? How much more prestige and power did he want? And how many times more did he want to stick it to the government and rub their noses in his success?

Too many people do this because they want to have toys which are bigger and better than what the other boys and girls have.

[wserra]

I think jail sentences and fines need to go up for individuals like this.

And it looks as though German prosecutors agree with you. They've appealed the sentence.

[Burnaby49]

Poorly written;

The court sentence of a former partner at law firm Freshfields for his alleged role in a giant tax fraud case is being appealed by German prosecutors and defence lawyers, prosecutors told Reuters, potentially delaying any possible jail time.

Since he's been convicted of his role in the tax fraud he's no longer "alleged" to have done it.

[The Observer]

Well, I'm glad to see that someone apparently realized the sentence was too soft. Given that Ulf Johannemann was able to post bond in the amount of 4,000,000 euros, it would seem that he did profit from his crime. I don't recall that he was fined personally as well for his actions which seems wrong as well. I think it tends to set up the situation where people will be willing to serve the time, particulary if the sentence is light, and then enjoy their ill-gotten gains after they get out.