Latest news with #Kai-UweSteck
Daily Maverick
31-07-2025
- Business
- Daily Maverick
Milestone conviction in multibillion ‘cum-ex' tax fraud tightens noose around Investec
A central figure in the epic 'cum-ex' tax fraud scheme was convicted in June after cooperating with prosecutors. At the height of the scheme, Dr Kai-Uwe Steck advised Investec and others on how to claim fraudulent tax refunds from European governments. Investec has acknowledged what it calls the 'historical involvement' of its employees, but denies wrongdoing. The conviction of German lawyer and financial engineer Dr Kai-Uwe Steck, a key player in Europe's largest tax fraud scheme, may intensify scrutiny of Investec Bank's allegedly major role in financing and profiting off fraudulently procured tax refunds worth millions of euros. AmaBhungane has reported extensively on the 'cum-ex' scam, which drew in a number of banks and other financial service providers around the world. The basic mechanism of the scam was to claim tax refunds on dividend tax that was never paid. This required large amounts of upfront funding, which Investec provided to some key fraudsters. Read more about the complex mechanics of the scheme here. On 3 June, the Bonn Regional Court sentenced Steck to one year and 10 months in prison, suspended for three years. He was convicted on five counts of tax evasion related to cum-ex transactions. Steck played a central role in setting up multiple fund structures that were used in the scheme, as well as complex offshore payment systems to launder the illicit profits. According to the court ruling, Steck admitted that dividend tax refunds were obtained without actual tax payments. He personally earned €23-million (about R448.5-million) from these trades. Steck cooperated extensively with German authorities, helping to recover more than €660-million (about R12.87-billion) in fraudulent tax refunds. As part of his probation, he is required to continue repaying millions of euros. Both Steck's conviction and his continuing cooperation with authorities could have repercussions for Investec – if not legal, then most certainly reputational. A massive leak of documents around the fraud that formed the basis of our previous reporting on the story included extensive evidence of the involvement of Investec's UK and Ireland arm, as well as some direct interactions between Investec staff and Steck. Investec's investment in cum-ex AmaBhungane previously reported in a three-part series that Investec was also involved in facilitating deals where US pension funds were used for similar cum-ex scams. We additionally revealed that Investec supported infamous trader Frank Vogel's company MF Finance with up to €12.7-billion (about R263-billion) between 2011 and 2015. One particularly revealing detail in the leak is a meeting that took place on 19 January 2010 at the Frankfurt offices of the now-defunct law firm Dewey & LeBoeuf in Germany. According to documents seen by amaBhungane, Investec's then-head of equity finance in Dublin, Loman Gallagher, and deal structurer Michael Byrne attended the meeting alongside Steck, convicted cum-ex figure Hanno Berger and representatives of Zeta Financial Partners, a boutique advisory firm that worked on tax arbitrage structures. The leaked documents describe the 'cum-ex nature' of the trades being 'openly discussed from the onset', with all parties 'very familiar' with the mechanisms. The documents also indicate that some guarantees and decisions were discussed with, or escalated to, Investec's head office in Johannesburg, implying high-level awareness of the deals. Our investigation suggested that Investec had been acting with the apparent approval of senior Investec managers, including now-deceased executive director Alan Tapnack. Among the leaked documents there is also a legal opinion that Investec commissioned from Steck. Following Steck's conviction, amaBhungane sent questions to Investec, including whether the January 2010 meeting took place as described, whether Gallagher and Byrne had sought or received approval from the bank's leadership, and whether any employees had since been charged or subpoenaed. The bank did not answer specific questions, instead referring amaBhungane to its March 2025 financial statements and a press release issued on 14 September 2024. Per the financial statements: 'The group also holds a provision that reflects the estimate of financial outflows that could arise as a result of investigations concerning historical German dividend tax arbitrage transactions.' The size of this provision is not, however, disclosed to shareholders. Investec does admit though that its 'historical involvement in German dividend tax arbitrage transactions (cum-ex) continues to pose a significant risk. Ongoing investigations by the Cologne Public Prosecutor and the German Federal Tax Office create uncertainty around the ultimate financial impact, potentially affecting provisions and disclosures in the financial statements. While the group is cooperating with authorities, the ongoing investigations and potential for civil litigation create significant uncertainty.' For South Africans, the unfolding scandal matters not just because of Investec's prominence, but also because it raises broader questions about the governance practices of financial institutions operating across borders. Steck's sentencing is one of many. His cooperation, along with the mounting legal momentum in Germany, may yet lead to more prosecutions and further disclosures. For Investec, the legal risk remains unresolved. Its financial statements acknowledge a 'significant risk' and 'uncertainty'. But the reputational damage – and questions about ethical accountability – may prove even harder to contain. Whether Investec acted knowingly or recklessly is now the question that regulators, courts and perhaps the public will be forced to confront.
Bloomberg
03-06-2025
- Business
- Bloomberg
Star Tax Scandal Witness Kai-Uwe Steck Convicted in Bonn Trial
Kai-Uwe Steck, a star witness who exposed the inner workings of the Cum-Ex scandal, was convicted and sentenced to a suspended jail term of 1 year and 10 months for his own role in the tax scheme. Steck was guilty of involvement involving over €428 million ($488 million) in losses to the German tax authorities, the Bonn Regional Court ruled on Tuesday.
