Cum-ex trades were an obscure but hugely profitable niche product for a number of banks and law firms, many of them based in London. The trades rose in popularity in the wake of the Great Recession, when much of the financial industry was reeling, in part because, as one participant put it, national treasuries never ran out of money.
Many countries in Europe were targeted by cum-ex traders, with much of the activity starting the early 2000s. The trades cost Germany $10.5 billion, the authorities said. France, Denmark, Italy, Belgium, Norway, Spain, Finland and other countries also suffered immense losses. One by one, the countries closed the loophole that allowed cum-ex trades — Germany passed a law prohibiting it in 2012 — but often failed to notify the tax authorities of their neighbors.
Mr. Berger did not invent cum-ex trading, but he was described as its most formidable intellect and one of its most active proponents. He was convicted of acts that occurred in Germany, between 2007 and 2013. He and others have long maintained that the trades were legal and pointed to a number of law firms which had provided opinions to that effect. He said during the trial that he had a duty to present clients with the full range of possibilities, and cum-ex was among them.
“We have to think of the clients,” he said. “That was my credo.”
Mr. Berger once worked for the German government and had earned a reputation as one of the country’s most fearsome tax inspectors. He later went into private practice and, according to a former colleague, was initially incredulous when he heard about cum-ex trading. He soon came around.
The former colleague, testifying anonymously under German law, was a witness on behalf of the government during the 2019 trial of two London bankers. Describing a meeting at the Frankfurt law firm that Mr. Berger started in 2010, the former colleague testified that Mr. Berger said, “Whoever has a problem with the fact that because of our work there are fewer kindergartens being built, here’s the door.”
David Segal
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