Economic crimes | German Chancellor Scholz is a suspect in a multibillion-dollar tax fraud case

German Chancellor Olaf Scholz is suspected of helping a bank that collapsed due to tax fraud. Scholz denies the charges.

Germany’s chancellor Olaf Scholz will testify in court on Friday about his role as mayor of Hamburg in a multibillion-dollar tax fraud case.

It is about the so-called European CumEx scandal, which was exposed by a number of media houses in 2017. Using loopholes, investors, bankers, brokers and funds, among others, tricked governments into paying them tax refunds for taxes that were never paid.

The biggest victim was the German state, which was defrauded of around 30 billion euros with the help of illegal tax planning.

One one of the parties in the case is Warburg Bank from Hamburg. The German state was defrauded between 2007 and 2011 with the help of share transactions made through the bank and the related illegal tax planning up to 300 million euros.

A year ago in June, Warburg’s former director was sentenced to five and a half years in prison for tax evasion. He is the first banker to be convicted in connection with the Cumex scandal.

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Recently, the prosecutors who investigated the messes in Hamburg found more than 200,000 euros in cash in connection with the search of the home of a local politician of the Social Democratic Party Johannes Kahrs from the safe.

The money is suspected to be a reward for Kahrs’ efforts to protect the bank. Kahrs himself has not agreed to comment on the origin of the money.

The same Scholz, who represents the party, served as mayor of Hamburg in 2011–2018. In 2016, at Kahrs’ request, he met with the owners of Warburg Bank, even though many of the bank’s executives were already under investigation.

The bank had received 47 million euros in illegal tax refunds, and was trying to get out of the situation so that it would not have to pay back this unjustly received money.

Shortly after the meeting, the tax authorities of the city of Hamburg withdrew the request to return the money. The reason was that the case was time-barred.

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Later, a German court overturned that decision and the bank has since paid the 47 million euros back to the city.

Scholz according to his own words, he has done nothing wrong. Nor does Scholz, according to his own words, remember the details of his meetings with Warburg executives.

“This has been on the back burner for two and a half years now. Countless documents have been examined, countless people consulted. The result is always the same: there has been no political influence”, Scholz recently answered to journalists.

According to Scholz, he also knew nothing about Kahrs’ money.

Although Scholz assures that he was not involved in any illegalities, the trial is one more sorrow in a situation where Germany is threatened with an energy shortage and Scholz’s political popularity is high.

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