Witness Involved in Cum-Ex Dividend Scam Escapes Jail Time
Serving a Lenient Sentence in a Massive Tax Fraud Case: A Look at Kai-Uwe Steck
The Bonn Regional Court recently announced a verdict on Kai-Uwe Steck, a central figure in the billion-euro Cum-Ex tax fraud case. Steck avoids a prison sentence and is ordered to pay millions instead.
At 53 years old, Steck faced charges of five counts of aggravated tax evasion between 2007 and 2011, leading to a total tax loss of 428 million euros. The court has seized 23.6 million euros, with Steck having already paid 11 million.
Steck's lighter sentence, a suspended jail term of one year and ten months, stems from his role as a key witness, significantly contributing to the Cum-Ex investigation. In 2022, his former accomplice and mentor, Hanno Berger, received an eight-year prison sentence from the Bonn Regional Court.
The Insidious World of Cum-Ex
The Cum-Ex system, described by the Bonn court as a "perverted system," allowed financial actors to gain refunds for taxes never paid by repeatedly trading shares with and without dividend claims. The peak of this fraud was between 2006 and 2011, resulting in an estimated double-digit billion-euro loss for the treasury.
The prosecution demanded a sentence of three years and eight months, while the defense argued for a stay of proceedings.
Steck's lawyer, Gerhard Strate, expressed satisfaction with the verdict. "We are basically satisfied with the verdict." The lenient sentence is far from the prosecution's demand, and there seems to be no plan to appeal the decision.
Steck, a former partner of Cum-Ex architect Berger, initially stood by the legality of the scheme but cooperated with the prosecution and testified as a key witness in multiple trials against other Cum-Ex actors. Steck showed remorse, even appearing in a TV documentary expressing regret.
Questions of Fact and Guilt
The trial against Steck was unusual because the charges against him were virtually indisputable, and the case largely hinged on Steck's own admissions. The focus of the dispute was whether the trial should have taken place in the first place.
Steck had accused former prosecutor Anne Brorhilker of promising to apply for a stay of proceedings. Brorhilker denied this promise, and the matter caused tension before the verdict. With the lenient sentence, the concern of deterring other criminals from cooperating with authorities seems unlikely.
From Criminal to Crusader
The verdict was divided into two sections: the first described Steck as an intelligent and unscrupulous criminal at the heart of the largest tax scandal in the Federal Republic. Steck played a pivotal role in facilitating and elevating Cum-Ex transactions, making money available for the crime within days.
In the second part, the court highlighted Steck's transformation from a participant to a key witness in exposing Cum-Ex activities. Steck broke away from his previous associates in 2016 and began an intensive cooperation with the authorities, offering critical insights into the workings of Cum-Ex. He encouraged other participants to come forward, leading to the repayment of at least 660 million euros to the German state by banks and other actors.
A New Courthouse for Cum-Ex Trials
The verdict was read in the Siegburg branch of the Bonn Regional Court, a new building constructed at a cost of 43 million euros due to the anticipated influx of Cum-Ex trials. However, the expected flood of trials has not occurred, with the modern building being underused thus far.
Steck's lighter sentence, a suspended jail term of one year and ten months, might not deter other criminals in the business sector from cooperating with authorities, given that he was ordered to pay millions instead for his role in the Cum-Ex tax fraud case. In light of his subsequent transformation from a participant to a key witness exposing Cum-Ex activities, Steck's case showcases a unique combination of finance, business, and criminal activities.
