Boyish Banker Tells How His ‘Cum-Ex Education’ Led to Courtroom


(Bloomberg) -- A banker on trial over his role in controversial dividend taxes told a German court that he initially didn’t possess a deep understanding of the practice and only learned some details about Cum-Ex cases when he talked to prosecutors last year.

Nicholas Diable, 38, used his testimony to portray a man who was drawn into the world of finance at an early age, never met some of the key players of the Cum-Ex industry and sometimes only followed orders. He’d landed in finance after turning down a chance to play soccer for a London club.

To make his point, Diable described a meeting a few years back in which he was entirely silent and was only asked once about his young appearance.

Diable is the second defendant alongside Martin Shields to lay out his years working on Cum-Ex transactions. The deals peaked between 2007 and 2011 and caused German taxpayers billions of euros in lost revenue because of a loophole that allowed tax refunds to be claimed twice. Shields, in his own testimony, described the practice as something that even junior bankers should have been able to detect. Still, Cum-Ex required the complex interplay of multiple actors in the financial industry to work, he said.

Lawmakers estimate the financial engineering cost the government more than 10 billion euros ($11 billion) in lost revenue. Shields and Diable, who are cooperating with prosecutors, face charges that they helped orchestrate transactions from 2006 to 2011 that led to a tax loss of more than 400 million euros.

Addressing the court in Bonn, Diable said his “Cum-Ex education was completed” only after changing employers in 2009, and that he wasn’t aware of some details of the deals until he traveled to Cologne last year to talk to prosecutors. While there’s no formal deal that grants the defendants leniency, they are cooperating in the hope to avoid a lengthy prison term by helping uncover crucial elements of the transactions, as well as people and financial-industry players that were involved.

The court will have to determine whether the practice was legal and whether people participating can be convicted of crimes. The government at the time was aware that double refunds could occur and stepped in only at a very late stage to abolish the practice.

Diable appeared in court wearing a navy suit and looking younger than his age, occasionally giggling during testimony, particularly describing his first steps into banking. Born in England, Diable described how he landed in the world of trading as a young man, having turned down an offer to play soccer for the West Ham United Football Club in order to finish high school and pursue a career in finance.

His first job took him to a regional bank from Australia, the country where he grew up as a teenager, working his way up to become a back-office derivative settlement employee. When he turned 18, Diable decided to move to London, inspired by his uncle who was a trader there, he said.

He arrived in early 2000 and joined broker Cantor Fitzgerald LP before moving on to Credit Suisse Group AG and ultimately ending up at Unicredit SpA’s HVB unit, where he hooked up with Shields. Shields moved on in 2008 together with his superior, Paul Mora, to set up Ballance Group, a company that advised clients on Cum-Ex deals. Diable followed them in 2009.

So far, the Cum-Ex scandal has caught up lenders including Deutsche Bank AG, Bank of New York Mellon Corp. and Societe Generale SA.

©2019 Bloomberg L.P.

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