Macquarie Wins Dismissal of Munich Tax Deals Investor Suit
Macquarie Wins Dismissal of Munich Tax Deals Investor Suit
(Bloomberg) -- A Munich court ruled that investors seeking to make Macquarie Bank Ltd. cover their losses from controversial Cum-Ex deals can’t sue the Australian lender in the Bavarian capital.
The bank doesn’t have a branch in Munich so that city isn’t the right location for the suit that was seeking 30 million euros ($33.3 million), the tribunal said Tuesday while dismissing the case. They could sue the lender in the U.K., where Macquarie operated, the court wrote in the judgment. The judges didn’t accept the plaintiffs’s argument that people from other units operating in Munich acted on behalf of the bank.
The investors had put money in a high-risk fund linked to the controversial tax deals. The fund ended up costing wealthy investors a total of 190 million euros, according to the filing. It traded heavily in Cum-Ex and investors weren’t told about the real nature of the tax-driven trades. Since Macquarie acted as as prime broker in the deals, the suit seeks to make the bank to pay for the losses of those investors who are part of the case.
Macquarie declined to comment.
The lawsuit is one of many legal actions, including numerous criminal probes, related to the controversial tax arrangements. Lawmakers estimate that Cum-Ex deals, which triggered multiple tax refunds on dividend payments, cost the German treasury more than 10 billion euros in revenue.
The Munich case was filed by a German company set up to help wealthy individuals -- including billionaire Erwin Mueller -- recoup money they had invested in a Luxembourg fund called Sheridan. Their lawyer, Eckart Seith, said he’ll appeal. The judges’ argument that no one from the Sydney-based bank acted in Germany is wrong as the lender had people in Munich arranging their business there, he said.
“The judges are rolling out the red carpet to organized crime,” Seith said. “It’s helping international finance criminals escape.”
The Cum-Ex scandal has ensnared multiple financial institutions, including Bank of New York Mellon Corp., Merrill Lynch and BNP Paribas SA. The transactions used short sales of German stock around dividend day in an effort to get double tax refunds. The German government ended the practices in 2012 when it changed the way dividend tax was collected.
The Australian investment bank financed the deals in 2011 after the lender already knew the German Finance Ministry was trying to clamp down on the practice, the suit argues.
In a September 2018 release related to the lawsuit, Macquarie said that it received extensive external legal advice in relation to its involvement and believed that it was acting lawfully.
(An earlier version of this story was corrected to fix the spelling of a name in the sixth paragraph.)
The case is: LG Muenchen, 40 O 4474/18.
To contact the reporter on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net
To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser
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