Frau Fraudbuster: German bankers and traders trembling at hotshot lawyer's 10-year investigation

Whenever she is spotted on the high-speed train to Frankfurt from her base in Cologne, Anne Brorhilker strikes fear into some of the world’s biggest investment banks. As lead local investigator in Europe’s biggest tax scandal she is a frequent traveller on the intercity express as it hurtles towards the heart of Germany’s financial centre.

In her steely, bespectacled sights are the imposing glass-and-concrete offices of the city’s major international banks. Typically, one of them will be raided by police at dawn the next day.

Although the scandal, known as Cum-Ex, has been unfolding in Germany, it is about to embroil the City, where banks and traders are suspected of being deeply implicated in the huge tax scam. 

Those under investigation in Germany include Britain’s Barclays, Bank of America’s Merrill Lynch, Morgan Stanley, BNP and Nomura, as well as top law firms and auditors.

So far prosecutors have conducted at least 13 raids since March 2022 – and the pace of the probe is set to accelerate.

Germany is at the centre of a Europe-wide investigation into Cum-Ex, a controversial trading strategy that exploited a loophole in how dividend tax was collected so that multiple investors could claim refunds on a tax that was only paid once.

The net widens: Lead investigator Anne Brorhilker, inset, is so busy she needs a new courthouse linked by a high-speed rail line to Frankfurt, above

The net widens: Lead investigator Anne Brorhilker, inset, is so busy she needs a new courthouse linked by a high-speed rail line to Frankfurt, above

The alleged perpetrators were financial traders – many of them based in London – and their clients. The losers were taxpayers. In the case of Germany, which stopped the dividend tax trades in 2012, up to £10billion may have been lost to the public purse.

Brorhilker, 50, has been on the Cum-Ex case for a decade. Her Cologne operation has expanded to become by far the most ambitious of Germany’s three regional investigations. She now oversees 120 probes with 1,700 suspects, most of whom are in London.

As Germany’s fraudbuster-in-chief relentlessly pursues her prey, the number of suspects continues to climb.

Barclays employed 124 bankers who were later named as suspects. Charges may come as early as next year, according to financial newswire Bloomberg. The bank declined to comment.

Officials in the Netherlands, Finland and Belgium have launched their own probes, while Denmark has filed about 500 civil lawsuits related to dividend-tax refunds.

Danish authorities last week won the right to pursue an alleged £1.4billion tax fraud in London’s High Court after the Supreme Court ruled it could be heard in England.

Lawyers say the judgment from England’s highest court will have profound implications for other Cum-Ex cases being heard.

‘This ruling will reverberate around the world,’ said Aziz Rahman, senior partner at financial crime specialists Rahman Ravelli.

‘This has to be seen as a significant victory for the Danish tax authorities,’ Rahman added. ‘It will also give reassurance to other countries that are looking to recoup huge amounts of money that they paid out due to Cum-Ex.’

The multiple defendants in the Danish case include British hedge fund trader Sanjay Shah, who ran now-defunct Solo Capital. They all deny the charges. Shah’s representative was contacted for comment. In another development last week, an ex-Fortis banker was sentenced to three years and three months for his role in the trading scandal.

The German, who can only be identified as Frank H, was found guilty in a Frankfurt court of siphoning off £45million through dodgy Cum-Ex deals.

Dutch bank ABN Amro, which took over the part of Fortis that carried out the trades, has returned the money to the tax authorities.

The conviction brought the number of people who have been found guilty so far to at least 14.

German authorities also have successfully recovered about £2.7billion – not including payments clawed back through a series of criminal trials.

Several other high-profile trials continue.

They include that of Henry Gabay, founder of now defunct London-based asset manager Duet Group.

He recently told a German court that he was innocent and that the ‘devastating’ Cum-Ex charges against him were built on the lies of his former business associates. ‘My whole life is in shambles,’ Gabay told the judges. He claims he relied on legal advice that cleared the deals at the time.

‘Had I only had the slightest idea that the legal opinions didn’t cover the whole picture and risks, I would have never allowed these deals to be done under the Duet umbrella,’ he said.

Defendant: Hedge fund trader Sanjay Shah

Defendant: Hedge fund trader Sanjay Shah

Gabay’s lawyer said his client ‘deeply regrets’ that ‘renowned’ banks and lawyers used his hedge fund to carry out deals now deemed illegal.

Also in the dock in a separate case is Christian Olearius, the former boss of prestigious private bank MM Warburg which was seized by the Nazis in the late 1930s. Olearius, 81, is on trial for allegedly arranging a £245million dividend tax fraud. He has denied all charges. Olearius, who has links to German Chancellor Olaf Scholz, recently accused prosecutors of plunging the 225-year-old Hamburg-based bank into its biggest crisis since the Nazis forced out MM Warburg’s Jewish owner in the late 1930s.

A court recently awarded Olearius a five-figure sum in compensation after it emerged his personal diaries were seized by prosecutors investigating the case, and incriminating details from their probe leaked to the media.

Olearius accused prosecutors of conducting a ‘shallow, flawed and biased’ investigation and said the charges against him were based on ‘insinuation, repetition and speculation’. He faces up to ten years in jail if found guilty on all charges.

Olearius and co-owner Max Warburg have already paid £175million from their personal fortunes to compensate for the tax damage caused by the bank’s role in Cum-Ex deals. MM Warburg declined to comment.

A new £38million courthouse dedicated to hearing cases brought by Frau Brorhilker is due to open next year in the Bonn suburb of Siegburg. That could prove convenient for London-based defendants as Siegburg is connected to Frankfurt airport via a high-speed rail link, meaning they can fly in and out on trial days.

Suspect-spotters, take note.

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