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By John O’Donnell
FRANKFURT (Reuters) – MM Warburg, part-owned by one of Germany’s oldest banking dynasties, offered on Wednesday to repay some gains from a share trading scheme at the center of the country’s biggest post-war fraud case, a letter seen by Reuters showed.
The trial in Bonn is focused primarily on two investment bankers and is the first in a wider investigation aimed at recovering billions from banks which prosecutors say profited from so-called cum ex trades.
A court spokesman told Reuters by telephone that a judge had told the court last week that the trading was illegal and amounted to tax evasion.
That, in turn, prompted Warburg’s lawyers to write to the lead judge in the case saying that the bank was willing to repay some of its gains, a message that was also delivered in court on Wednesday, a spokesman for the bank told Reuters.
Warburg’s lawyers said in the letter it had not deliberately sought to defraud the state, adding that it had ‘intensified’ talks with the authorities to repay some of the money.
The letter did not say how much cash Warburg was willing to repay, but the spokesman said it was able to cope with any possible repayment and that some money had been set aside.
Warburg, set up in Hamburg by members of the Warburg family, is one of the banks named in the state prosecutor’s charge sheet as a beneficiary of the multi-billion euro trading scheme.
Prosecutors allege that players in the scheme misled the state into thinking a stock had multiple owners who were each owed a dividend and a tax credit by trading shares rapidly around a syndicate of banks, investors and hedge funds.
Germany estimates this cost it more than 5 billion euros in total, although experts believe it was at least twice that.
The trial is being closely followed in London and Frankfurt, where bankers say much of the trading was organized.
German state prosecutor Anne Brorhilker outlined criminal charges against two bankers at the launch of the case this year.
One of them, Martin Shields, has told the court that the trading thrived between 2005 and 2012, as investors from around the globe made multi-billion-euro trades on German companies.
Brorhilker has outlined more than 30 instances of double-tax reclaims totaling 447 million euros ($493 million). Of those, 166 million euros involve Warburg, the charge sheet shows.
($1 = 0.9073 euros)
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