A lot of people are focusing on the bankers who undoubtedly criminals. But, please don’t forget the lawyers who make this kind of fraud “legal.” As a lawyer myself, I can say that too often I have seen lawyers make overly technical and strained interpretations of regulations that are simply not plausible given the overall intent and purpose of the regulations. Also, if cum-ex was all so legal and above board, why were the traders too afraid of American regulators to do it in America? A judgment call that regulators are weak or that you’re unlikely to get caught doesn’t suddenly make something legal. Not only should these professional enablers go to jail, but the regulators of the professions should also strike off lawyers which are involved in giving such unethical advice. Also, it interesting that these traders were part of a hyper masculine financial world and it was a woman who was the whistle-blower. Maybe greater gender balance would calm down some of the rampant aggression, greed and protecting the “bro’s” that fuels such crimes. In my experience woman are more fussy and are more inclined to do things by the book.
110
These crooks need to be locked away forever. Just as those in the 2008 debacle should have been locked away. As we sit here and watch our own government going down the rat hole because elected officials won't saving our Constitution, it seems our entire way of life is hereby threatened by one crook after another. I'm depressed and discouraged that the bad guys are winning and doing so by undermining the rule of law for money.
82
Always enjoyed the film "A Taxing Woman".
4
I wonder if the seeds of destruction sown by these immoral people will blossom into the next financial meltdown
Sadly their actions weaken the very bodies that are able to prevent cataclysmic results stemming from their greedy psychopathic behavior.
Sad, demoralizing and disgusting.
41
The utter contempt these people have for their own countries and fellow citizens is astounding. Imagine going through life stealing from your own government and thinking it makes you clever.
77
This is a dangerous distraction from the rampant fraud in America’s welfare programs!
11
Brits! of course.
This is part of why the elite Britishers of today appear eager to throw their hundreds of years of democracy and development away like a pile of old clothes.
Harry & Meghan, Inc. invented nothing.
7
Simple answer: rescind tax laws for stock dividend tax refunds. No refunds on dividends=no opportunity for fraud. Also, it would be a tax increase on the 1%, a well deserved tax increase.
There’s a shyster on every corner and they come in a lot of packages, big Pharma, banks, developers, etc etc etc
59
My mother taught me, "The rich get richer and the poor get poorer." She forgot to teach me the details.
Thank you, NY Times, for educating me.
38
This is why we need Bernie or Elizabeth Warren in the White House. This is why your taxes are high, the roads in bad shape, social security is under attack and we have poor medical care.
74
This is why I'm voting for Elizabeth Warren.
As a small business owner, I pay my taxes. How dare these big business people get away with fraud....
69
Was sickened to read this article but not surprised. The banks, investment firms, traders, etc., who engage in this despicable and completely amoral behavior care about nothing but making money-the disastrous consequences of their actions to nations, governments, law abiding citizens and, yes, to the kindergarten kids who won't get a new school mean less than nothing to them.
This is exactly the same reckless, selfish, narcissistic behavior that led to the CDO driven collapse of economies around the world in 2008. And who paid the price for that one? Just about everyone except the sociopaths who caused it.
As difficult as it can be for governments to go up against these wealthy misanthropes and their high priced lawyers-somewhere, sometime these people need to pay a high price for their behavior.They certainly didn't in the US.
Confiscation of everything they own and long prison terms are likely the only things that will make a dent in the commission of virtual crimes against humanity that these despicable continue to commit.
72
Another stellar mark on the record of Stan O'Neal.
5
Maybe this is what Trump was referring to in his tweet, “ Heading to Davos, Switzerland, to meet with World and Business Leaders and bring Good Policy and additional Hundreds of Billions of Dollars back to the United States of America!” Well at least back to his Republican banker cronies. If there is a massive tax swindle somewhere, you can be sure the Grifter in Chief is in on it.
46
Apex Predators! The Banks and most Financial Institutions. The Pirates migrated to the City of London and thence to Wall Street!
9
Would recompense be sought by the US? At one time perhaps but I fear it would not these days. More Reagan legacy stuff.
20
@caljn Well maybe another US tax cut for the 1% would help ??
6
A couple comments - First, I love how management team's defense is always "we didn't know" - well either their incompetent, they didn't bother to ask how the money was being made or they new. In all things, the most obvious answer is usually the answer - they knew or should have known. Secondly, self-regulation is no regulation - CDS, Opiods, S&L, e.coli break-outs - it's Congress' job to regulate, not the President's even though several President's have been happy to de-regulate. Society always pays for the lack of regulation and the lack of enforcement. Third, thank you to the FEMALE tax administrator.
75
I read the entire article but there was never an explanation of how the scheme worked, nor a link to the complaint that supposedly explains all. Very curious about the “private pension plans”-who sells them? Who buys them? How are they regulated.
60
“ the City of London, Britain’s answer to Wall Street.”
I think the City has been around a bit longer than Wall Street. Not sure which contains more villains though.
27
I’m confused as to how anyone could be on the side of this being legal.
I can’t trick the government into getting two refunds, so why does a big bank get to play by different rules? It’s pretty insane that big banks are getting any kick backs from the government on their massive investments actually - couple that with the fact that they pay no taxes. Ya, you’re already having your cake and eating too. No more.
41
Why were the regulators in Germany so slow when it came to the diesel standards fixing? Have these people been captured as in the US? The Financial sector needs serious regulation by trustworthy people. That, of course, may be the problem.
22
Why is something so basic made so complicated?
Tax cheats knowingly stole by claiming twice what was entitled according to badly written tax laws.
The participants took many forms, had many titles in many different companies. But they were all tax cheats. Criminals.
Bosses knowingly permitted this to go on. Criminals therefore as well.
Fines should be double what was stolen. Sentences should be cuádruple what is normal for tax evasion.
All money recovered should go into an international pool divided proportionally amongst countries ripped off, and that money should be used for two things, schools and hospitals. Construction of which should be managed not by the individual governments, but by a board responsible for the management and reinvestment of such recovered money.
And those jailed, should all be jailed together in one place and made to write, design and create policies for the betterment of countries and citizens. No freedom until such exist.
60
Panama Papers revealed the extent of tax evasion which will be addressed by the QECD this year. LUANDA LEAKS as big news in Europe gets no mention in the US. Advisers and consultancies mostly big accounting firms moving massive amounts of money into tax havens like Malta Jersey and British Virgin Islands. The joke in Europe there are more British Pounds offshore than onshore in UK. EU digital tax required despite complaints and threats by US President and US Treasury Secretary. Inequality makes us all poorer.
32
"in 2011, a clerk in the Bonn Federal Central Tax Office, came across tax refund applications that looked dubious. They were from a single American pension fund that had bought, then quickly sold, $7 billion in German stock. Now it wanted a tax refund of $60 million." Perhaps a method for proving tax was actually paid needs to precede any refunds.
34
Corporations, Cartels and Banksters Oh My! At some point, after hollowing out global economies, and passing laws to protect themselves, these operators will pull the plug and we will see a reprise of 2008. Follow the Yellow Brick Road at Your PERIL.
29
@Farmbuoy - - - 2008 was courtesy of our wonderful Democrats and the Community Reinvestment Act.
Never let politicians seize basic control of the mortgage banking industry, it'll collapse your economy.
7
@L osservatore
" Never let politicians seize basic control of the mortgage banking industry, it'll collapse your economy."
Never let mortgage bankers decide the rules for mortgage banking, they will vacuum your wallet and more.
29
@L osservatore
Rubbish! The US housing mortgage "financial vehicles" were invented by NY banksters, just like the ones that came up with this corrupt scheme. Sure, the banksters took advantage of what they saw as an opportunity to make money from loopholes in US laws, but they were the ones that acted criminally, not the law writers.
36
Does Elizabeth Warren know about this? Merrill Lynch needs to pay eleven-figure disgorgement, damages, fines, and penalties. And any other banks too. Executives need to disgorge bonuses and compensations, CEOs need to be fired, boards of directors need to be sued. All participants banned for life from any financial job.
Let's finally do to these banksters what Obama didn't have the luxury to do when he had to put out a global economic fire.
53
@Uxf
First, yes Obama didn't stomp on the perpetrators when he coud have and should have, but it was Dubbya that held office when all this went down. Obama inherited the debacle.
But, Obama should have let the corrupt banks fail. If Washington and Wall St truly believe in Capitalism, they should have let it work. Instead of dumping billions of tax payers money into corrupt banks so the could survive and pay themselves huge dividends and bonuses, they should have crashed.
The healthier banks would have survived. The sick ones would have dumped their corrupt mortgage brokering divisions eaten losses and the world would have recovered. And the tax payers would not have suffered the way we have ever since with the weak economies and low interest rates undermining real savings.
27
Hilariously, we still don’t know how the trade works.
Btw, a five minute google search on Greg Summers shows that he is a financial advisor and that his “grand home” is a $1 million place in a small NJ suburb. Certainly more expensive than the average place in the US, but hardly the mansion of a global finance mastermind. Odds are it’s his client’s money.
Oh, and could the
11
Now's the chance to do what Obama didn't have the luxury to do when trying to put out a fire in the global financial system. CEOs need to be fired and then put in orange. Boards of directors need to be sued. The top 1000 employees at the bank need to forfeit their bonuses and compensation for ALL the years when this was going on. It is outrageous if, when banks are caught stealing, their only repercussion is to give the money back. They need to pay at least treble damages.
And since these banksters played cute by making the same tax claim in two different countries, they should pay the full treble damages to two countries. (So sextuple damages!)
34
Basically, it's a case of double dipping, taking two bites of the tax break apple when one is only entitled to one by any common sense understanding. The main argument of that defense attorney is specious i.e. you didn't right a law right enough to prevent such theft therefore we are innocent of any crime. So if a jewelry store inadvertantly has a breach in security and leaves a window open, it's okay to go in and steal and there is no crime. What nonsense.
39
@Marcus
Didn't you mean to say, "you didn't WRITE a law TIGHT enough... "?
Two rights in your case make a wrong.
5
The stock market, tax law, and other financial areas of business thrive on an overabundance of complexity, after all, it has always been a game of keeping the wealth in the hands of the wealthy. Money buys politicians and they write the laws for those with the money.
Of course, the real problem is those welfare fraudsters and birth tourism ! Yeah ! ...... er..... wait...... I don't recall having to bail out those welfare fraudsters, just the banks and all those rich dudes in suits......
Is it possible that the rich dudes in suits are the real criminals we should be paying attention to?
Naw ! That would be un-American !
Go Capitalism !
.
40
Aren't we glad things like that can't happen here?
7
Weren't many of these the same guys who were bailed out during the GFC with the little gals & guys paying the bills through austerity, wage cuts and the slashing of public expenditure? There are times when I wonder where the revolutionary spirit has gone. This is one of them.
29
I laugh every time someone says we that it would be best if a business man ran the government.
74
@Lives in the Misery Ozarks
Actually, that would be great were it an honest business person. I worked with companies that did business with Ross Perot back in the '70s and '80s, and thought he could have been an excellent President until his paranoia surfaced and took him out of contention.
But these days I believe we need people with incremental government experience. Not some ambitious Mayor. I want someone that has proven leadership skills demonstrated at several levels and for at least a decade.
There is what is being called a 'deep state' within all governments. An elected official has to be able to win the support of these internal 'movers and shakers' as much as win over the electorate if they are to be effective.
For example, Jimmy Carter failed because he didn't have the deep state fully backing him whereas Jim baker delivered that for Reagan. Sometimes it's the power behind the throne that is most important.
15
Forget unfettered capitalism, it doesn't work.
32
The article correctly portrays these cum-ex men as sociopaths. About none of them will learn pathos from punishment but they will feel the pain of loss of lifestyle. We have to accept that sociopaths live among us and always will. For that reason, when we have the rare opportunity to elect politicians with integrity we should not miss the chance to do so. Those are our only opportunities to garden the laws and rules against abuse by sociopaths.
As is shown in our current impeachment proceedings, and is shown in this article, the rules we operate under must be clear simple and thorough. How do we overcome an entire party that is intent on violating its constitutional responsibility when it controls two or more branches of government? A more thorough set of rules is required. Similarly we must have tax rules written on behalf of average (stupid, according to cum-ex sociopaths) citizens, not by the agents of the financial elite for the benefit of the financial elite.
There should be no possibility of loopholes or evasion. It's not that complex but it will be a big change. Our foreign policy should include inducements for other governments to follow suit. I advocate a rethinking of the entire financial sector and the idea of making money by owning money. But for now, stopping sociopaths will be enough.
43
It’s too bad that our best and brightest don’t go into other fields. We need to find a way to reward human beings to do more productive activities
18
Best and brightest? Circumventing tax laws by creating duplicate refunds is not exactly brain surgery. Best case .... these men are sociopathic greedy slobs.
12
Who cares about kindergarteners! Apparently not the wealthy traders.
12
Disgusting behavior by a few. It drags down the good, honest work that most in the financial profession do. The truth is computers and lax regulation have enabled many corrupt financiers to evade the system for far too long. After Glass-Steagall we cured many of our worst excesses. Now that it's undone, thank you Phil Graham, our rules are far too loose. Our weak politicians don't enact real public policy (regulation - job retraining, etc.), making monetary policy fill in the missing blanks. Of course making money cheaper and more plentiful does not immediately translate to hourly workers, but to those who own assets. Since Reagan, the Republicans have sought to weaken financial oversight. It's time to enact some tough global standards so no one is being fleeced while they haven't a clue.
33
This sort of shenanigans makes me think of calling Bond, James Bond, for a mission.
5
Would fraud decrease if total compensation of employees in the financial sector could never exceed $200K per year?
15
Fraud is informally described as obtaining a financial advantage by deception.
These bank employees were deceiving and defrauding national tax agencies. And deserve punishment including fines, financial penalties and jail time.
But what about the directors of these banks and financial institutions? They must have wondered where the profits were coming from. And made inquiries. Or else willfully avoided making such inquiries. They must be prosecuted too.
53
@Loup
Fraud is just a posh word for stealing. These people are thieves as much as those that break into safes and ATM machines.
It doesn't help when our national leadership is bereft of honesty. IQ45 and his enablers don't exactly set a decent example do they.
15
As someone who identifies as a moderate, reading this article made me realize how correct Warren, and to an extent, Bernie, really are when it comes to the system being rigged.
Especially galling is the allegation that these bankers were ripping off their governments during the bailouts in 2008 and 2009.
89
Forget about the anonymous investment bankers who were in on the scheme and finally felt a little guilty about it to come forward. How about some praise and maybe a raise for the bank clerk who, doing her job, asked a few questions and persisted, despite threats to her "personal liability" to bring them to the attention of the authorities?
104
Having worked at a large US bank for over 30 years, I am not in the least surprised. Such schemes are a dime a dozen over the years at financial institutions large and small. The culture higher up has gone from "anything legal is OK" to "lets work overtime to make it look legal so we can get away with it". In addition to the criminal, there are many grey areas that might be truly legal, but are certainly unethical. As long as bankers are rewarded based purely on revenue (not risk, profitability or other metrics) we will continue to see these huge scandals unfold.
it was once said that continental bankers were risk averse, Americans risk-neutral, and Londoners risk-loving. But being unscrupulous on an ever increasing scale seems to be uniquely universal in the financial world. It's time to break the Banking culture that is equal parts libertarian, neoconservative and rogue capitalist.
105
It's interesting how the article mentions that some bankers were afraid of carrying out their operations in the US because of fear of prosecution. You would think we had a very robust IRS chasing down the bad guys and getting us US citizens our due taxes. But that is not the case. Two tax professionals I know of have cited how the IRS has been gutted in recent years and how that has decreased enforcement, especially where it concerns multi-billion dollar individuals and companies vs. mom-and-pop stores.
78
Never underestimate the capacity of the rich and the financial services sector to rationalize the stealing of money to maintain their lifestyle and privileges.
83
This is way beyond my pay grade, but wouldn't a simple change in the software to verify that the same basket of equities hasn't already generated a refund be sufficient?
31
It never ceases to amaze me how the wealthy are above the law. Can you imagine what they would do to ordinary citizens getting double tax rebates. They would take everything they had and throw them in prison after which they would still be in debt.
83
Totally agree. Why doesn’t this story get any/more coverage on tv? I never heard of this until now!!
13
The article and at least over 100 of the most recommended comments focus on greed and don’t mention digital technologies. Greed, deregulation, corrupt politicians, ineffective regulations, and kleptocratic billionaires have long existed; they didn’t suddenly envelop Wall Street and the City in 2003.
Prior to Ivan Boesky and Michael Milken’s slap-on-the-wrist convictions, insider trading happened openly on Wall Street in the 1980s. Drexel Lambert’s bankruptcy was as spectacular as Lehman’s. A third of the S&L institutions that funded most Americans went bankrupt after Congress deregulated them. Their executives got minor sentences, if that, and the “Keating Five” politicians paid no price. In 1984, Massachusetts changed laws and enabled interstate banking; the M&As that followed created “too big to fail” banks. The NYSE listed the 34th largest US bank, The Bank of New England, in 1988; regulators liquidated it two years later when its problems almost destroyed the FDIC.
Digital technologies allowed local crises to become global. They enabled the creation of complex instruments and transactions. They networked financial institutions inextricably. They allowed shocks to spread across the world, not in weeks or months, but seconds. They enabled both cum-ex and the 2008-2009 global recession.
Do condemn greed and corruption. However, ignore the role of digital technologies – and how they are changing how organizations are led – and such crises will recur and more frequently.
54
@Amit Mukherjee
Digital technologies are also the most straightforward to regulate. Because authorities can automate prohibition of unwanted actions regardless of how complex they are.
Greed is the root of why they don't apply such restrictions.
30
@Remarque
What about hackers? Haven't a few bank hacks already taken place?
2
Elizabeth Warren is the candidate most equipped to handle these criminals. She knows their tricks and they can't get anything past her. This is why the criminals on Wall Street are scared of her.
66
@Dottie
Sorry, but if Warren knew how this was being done she would have proposed serious legislation to stop it. She talks the nice talk of creating regulations and having them enforced.
2
@BWCA - Well, to be fair, I don't think Warren will be the one conceptualising and writing such regulations and legislation herself.
3
@Dottie
Are you suggesting she move to Germany to handle these criminals?
4
I was so upset, I did not want to finish the article. These individuals and the leaders of the investment banks need to go to jail for a long time. Only then will the culture of the firms change.
44
i am curious how this is going to affect the banking industry? wall street has been increasing the value of stocks while industry is in a resession. if the herd mentallity panics should banks fail, will investors suffer?
11
Is anything being done to identify the politicians and administrators that passed laws allowing this chicanery to be practiced. The article doesn’t describe the practice and why so many people thought it may have been legitimate.
18
@John
It's very, very hard and possibly impossible to write laws that someone can't find a way to re-interpret to find a 'loop hole'. I have often been amazed at how creative a criminal can be. Common thieves and banksters are just examples of how very clever people can be whether they went to college or not. Higher education just helps people apply their innate cleverness in different markets.
This is why children of all backgrounds and income levels need the opportunity to get to good colleges. If they don't we are wasting vast pools of cleverness that could help solve societies problems.
7
Let’s hope the German and European authorities track down and bring to justice every last one of these tax scammers. Get that obese Kiwi extradited out of New Zealand for starters. White collar crime, definitely the thinking man’s crime, robbing the authorities and the working tax payer, should face the same jail time as old school bank robber. Problem is Wall Streets influence peddling and it doesn’t take much to con this President.
30
@Dactta
Do you really think the US will allow Germany to extradite rich US citizens? They don't have diplomatic immunity, just financial, but that will be enough.
7
@Dactta
It would be great if IQ45 got swept up in this too. he's bent enough to be benefiting somehow.
6
@Dactta
Please do not insult the kiwi.
1
So what are we all going to do about the fact that a certain personality type or types invariably place themselves in positions of social power and can be expected to abuse that power? There is still an element of surprise it seems every time we get fleeced by these amoral sociopaths (or whatever label might be more appropriate).
Fool us once..... ?
21
Lordy, it just never ends. We all get worried about the scams run via the web and phones, but institutionalized just keeps going,. What to do when internal controls don't work? Go after the honchos, those who knew but turned a blind eye. They are even more culpable than the underlings. They are supposed to have systems in place to catch these things, and when they are caught, to stop them. I am so tired of this type of stuff. We hear time and time again that someone knew, reported but was ignored. Nail the suckers to the wall.
34
@Barbara This is true in the Boeing MAX scandal too. There's always a deniability get-out.
6
This has nothing to do with capitalism and every thing to do with outright theft and blatant absence of any moral fiber. These thieves should spend the rest of their lives behind bars with no possibility for parole and all their assets seized were ever they are hiding them. This kind of behavior is what causes bloody revolutions.
34
Waiting for the Michael Lewis book now...
11
To Mike L
NY6h ago
who writes
Our entire global financial system is a scam. I am a licensed securities dealer and the entire system is fixed and rigged for the rich.
YES. But why does the US not make an effort to clean it up? Ah, lets see!
From the Guardian
Trump and Clinton share Delaware tax 'loophole' address with 285,000 firms
"There aren’t many things upon which Hillary Clinton and Donald Trump agree, especially as they court very different Delaware voters ahead of a primary on Tuesday. But the candidates for president share an affinity for the same nondescript two-storey office building in Wilmington."
"This squat, yellow brick office building just north of Wilmington’s rundown downtown is the registered address of more than 285,000 companies. "
The Guardian , UK, 2016/apr/25/
The system is too useful to the Uber-Rich, both Republican and Democratic to be eliminated.
Only the little people pay taxes
46
And who is the long-time Senator from Delaware? Oh, that's right, the one we are righteously told is incapable of any corruption, no matter how bad it must look to the uninitiated...
11
Attempts to find online any book as described in the article by Niels Fastrup and/or Thomas Svaneborg titled “The Great Tax Robbery” is not yielding results ... ? There was a book written by Richard Brooks along similar lines.
5
@Coldnose The book is called "Det store skatterøveri" and was published by Politikens Forlag. I believe it was published in Danish only.
8
This article doesn't explain how this scam works. It's not that difficult to understand. The ability of financiers to hide their misdeeds in exotic language allows them to commit malfeasance in public. So I shall explain.
If you own a stock on ex-date, you are entitled to its dividend (a cash or stock payment). However, if you're a citizen of the country, you also owe tax on this dividend. So taxes are withheld on all dividend payments (similar to tax withholding on your W-2 salary). If you can prove you're not a local entity, then you don't owe taxes and are entitled a refund, also called a reclaim, of the local taxes (similar to how you get a tax refund on your 1099 if you've overpaid).
In the cum-ex scam, a trader buys a stock but then cancels the trade. Then the trader applies for a tax reclaim. This is like going to a store and buying something and then returning it. However the item allows a rebate from the manufacturer, so you use your purchase receipt and claim the rebate. You're getting something for nothing.
There is no legal basis for these financiers to be entitled to this money. The tax authorities were paying out reclaims without checking ownership and the traders were scamming the system. Period.
140
@Dottie I am always amazed that whenever there is theft, the defense is to make it seem so complex and devious that existing laws don't prevent it. That way, a new law must be created to describe and prevent the same theft from occurring. Because of ex-post facto prohibitions in the constitution, , the perpetrators get off with a slap on the wrist (example telephone service "slamming" in the US). When a little guy without legal representation gets creative and siphons off funds, he does hard time. But hire a big law firm and you can obfuscate the sun. Theft is theft.
9
@Dottie
I wish you were the prosecutor at the trial. ;)
4
Too good to be true, eh? What a surprise!
2
It’s rightly horrible and yet so morbidly exciting to read about such innovative crooks. What they could have done with that much of brain power.....maybe intelligence agencies can still use Martin Shields to uncover other clever fraudsters. After all we have our own Frank Abagnale, a phenomenal forger in his younger days, who is now a renowned FBI agent.
7
OMG, Wells Fargo missed out on this scam? How is that even possible? Wells Fargone clearly is hiring second rate Banksters these days. Time to sell.
14
@Coldnose:
Q: How can we tell when Wells Fargo executives are stealing money?
A: When the lights are on in their offices.
8
Another great article by the New York Times.
14
Jesus kicked the Money-Changers out of the temple. We build them one.
17
The only place in this article that even half-way explains the mechanics of this trade is the following:
“Through careful timing, and the coordination of a dozen different transactions, cum-ex trades produced two refunds for dividend tax paid on one basket of stocks.”
Is it just me, or couldn’t the average reader have benefitted if the author had spent a little more of the article explaining what “cum-ex” trades actually are?
32
Please deposit the perpetrators in an uncomfortable prison somewhere and then throw the key into the Marianas Trench
12
Clearly these guys don't know right from wrong so the expectation is they cannot be rehabilitated. Humanity is never far from putting heads on pikes, btw.
5
And who was it that claims there’s too much regulation in the economic and banking system. Who parades about that regulation holds back the economy and that regulation is bad and evil. Donald Trump the stable genius that’s who. Followed by The GOP. Libertarians. Let’s not leave out Boris Johnson and his Conservatives. Emmanuel Macron and his so-called centrist party La République En Marche. The same goes for Angela Merkel and her CDU. De-regulation is their main card. They know who’s making bucks of the crime-spree. And let’s not forget that many of these banks and characters involved are the same ones from past scams that almost brought the world economies to their knees. Get the picture. Let’s call this Cum-Ex scam and Ayn Randian libertarian mind-think for what it is: Greed and total bunk.
All these sovereign treasury’s and their assigned authorities need to turnover ever rock, every account and get every dime back to the honest taxpayers everywhere, shutter the bank and firms involved and get convictions and fines and frog-march these thieves straight to prison. Let’s show them what “suckers” we are. And why were at it let’s see Trumps tax returns.
34
It is of course hard to believe that bankers would do something dishonest, given the consequences to them.
Oops, there are no consequences - as was seen in 2008 when the financial bubble burst at that time.
Maybe that's why these things happen.
29
Classic example of why the majority of the public are rebelling against the "elite" - aka crooks.
Unless and until there is a successful move to stop this sort of corruption (of the spirit if not the substance the rule of law), then the populists will get more and more support. This is the sort of thing that led to the French, Russian and German Revolutions.
16
What is lacking in these perpetrators mindsets that they can even countenance trying to make these scams work?
6
Imagine all the services the govt. could not provide (healthcare, roads, schools, hospitals etc.). Millions of people paid the price in their sufferings for the crime these folks committed.
I doubt their punishment will ever be equal to the sufferings of many.
Additionally, a poor kid stealing small dollar item gets roughed by cops, goes to jail. While these folks stole billions, enjoy a very luxury life. Their friends and family greatly benefit. Will those beneficiaries ever pay back....I doubt it.
29
Is it time to nationalize banking?
9
@Roger Demuth
What would that accomplish? There would still be lots of people like this ready, willing and able to run scams like this.
3
It would most certainly be interesting for NYT and other reputable journalists to track the $$ from this theft. See which US politicians either have or continue to benefit from the funds realized in carrying out this operation. The only way to stop this type of endeavor is to prosecute and jail those involved. Treat the guilty no differently than someone who walks into and robs a business.
Think a little past the written article. The funds stolen from governments could have financed infrastructure, healthcare, or many projects beneficial to the citizens of any nation affected.
Speaking of healthcare, consider the way European healthcare is held up as a wrecked model of social medicine by our US pols. Maybe there’s a thread to pull and follow. Track the $$.
21
I am just so tired of being ripped off by corporate capitalism. They steal our pensions with casino gambles that make them rich, they steal our wages frozen at 1970 level, they steal what little public money is left for programs for the "general welfare", they steal our public resources and call themselves "self made men", they steal our data, our lives and our very existence as a species in their greed to profit from a dying planet. We the people have little time and diminishing power to make this stop. I am so filled with disgust, it gives me chest pains to read the news. Maybe we have one last chance to change our path, VOTE in 2020. Send these corporate thieves to jail.
43
The article never explains just how this worked. That would be an essential part of any coverage.
15
@Jonathan Katz
Perhaps it was over his head?
5
in the early 1970's Merrill Lynch was pushing a stock called Sterling Homex. Insiders who already owned stock made millions. Then the truth came out. When the company finished manufacturing a home it entered it as sold. Company folded, officers went to prison, Merrill customers lost their investment, Merrill raked in the commissions.
A few years later Merrill Lynch was selling potato futures. They sold more futures than there were potatoes. Once again Merrill raked in commissions and investors lost money.
Merrill Lynch was also involved in the bankruptcy of Orange County.
These are just three examples.
Merrill Lynch should have been shut down decades ago. Were regulators corrupt, or just complacent?
(the first two items were reported in the Rochester Patriot, which also reported the deadly Rely tampons and the cyanide leaching coke bottles)
21
Can we please stop speaking of business as if it is an unalloyed good. Or even a good?
Even Mr. Invisible Hand, Father of American Capitalism considered capitalists a dangerous breed, unreliable, greed-riven, prone to ego and thievery. Adam Smith told us exactly this would happen if we failed to regulate business and keep businessmen in their place, which is far, far from government.
The only thing surprising about this scam is that Harvard wasn't on board from the get. I trust they had their moments of high fevers and uncontrollable salivation before fear calmed the mood.
Its OK, they still have McKinsey. I mean, how much ruthless destruction and heartless robbery can one educational institution take credit for?
Money is a vile thing, profit is inherently off-color, and any country, like America, that refuses to regulate their business sector is a fool's paradise and, frankly, should die. As we are currently doing.
16
These criminals need to go to prison for a very long time.
If these criminals get sentenced to only a slap on the wrist then it will have been proven once again there is a criminal justice system for the poor and a separate one for the rich.
12
The famous painting "Judgement of Cambyses" from 1498 by Gerard David comes to mind upon reading this tale of greed and corruption.
4
Why bother putting on those pesky masks, getting an unlicensed firearm and robbing a liquor store when you can attire yourself in a suit then work for an investment bank.
23
Theft, such as this, is at the rotten core of capitalism. It has always been a scheme to enrich those who control it. The Russian Revolution core ideas were not wrong, but those in power were the wrong people. It did not help that western powers attempted to strangle it in its infancy by invading Russia. Monetary fines are not sufficient. Not only should those involved in this scheme be stripped of their wealth, they should be jailed or executed no matter their status. They have robbed governments of the capability to help the poor. They are the very people Jesus chased from the temple.
11
I’m not taking issue with the direction of your outrage. But with your reading of history. Nazi Germany did not invade the Soviet Union to fight Bolshevism, but to expand territory and “Lebensraum” for Germans.
2
In the 90s I ran an international stock lending desk. “Dividend arbitrage”? Pu LEEZE, nothing more than dividend stripping. This sounds like something along the same lines. Everyone knew it was wrong, was constantly looking to avoid getting caught but loved the profits.
20
Wall Street is the First National Race Track for thrill seeking money fetishists. And worse, they are funding this charade with "other people's money (ours).
12
The word from Washington is that if they can get these guys here, then they will be pardoned and recommended for the Nobel Prize in Economics. The American con-men feel both envy and pride in what their cohorts have done.
11
@Richard
Actually, Steve Mnuchin already has asked them to send him their resumes; he just happens to to have some openings for persons with their skill sets.
8
The invisible hand is a metaphor for the unseen forces that move the free market economy. Through individual self-interest and freedom of production as well as consumption, the best interest of society, as a whole, are fulfilled.
More claptrap from the con men at the top. You know why they think the common man is a dope? Because he believes this nonsense that they preach to him. He's a dope.
12
Excellent article. This reinforces my decision to move my accounts to Pictet Group, and this is working with and within the EU and USA banking laws. My question is just what do they teach for ethics in business school? And why are these major corporations not concerned?
9
This is a great article, albeit without details on how it works.
What's missing is the complicity of lawmakers (i.e., the lobbyists who draft the law and the politicians who help them, obliviously or knowingly). They write laws to have loopholes and gaps that can be exploited by their friends.
This is an attack on the rule of law. Laws cannot be so detailed and explicit that every scheme can be identified. Trying to do so just makes a regulatory nightmare that benefits the attorneys and insiders.
No one wants the alternative: the all-powerful "justice" agencies of totalitarian countries like China and Russia.
For a long time we've been subject to the propaganda the poor people are violent and lack the self-discipline to justify social support.
It's very clear that private financial services aim mainly to benefit the wealthy in anti-social ways. There is no way to police this. Is the only solution to get rid of the wealthy, distributing wealth more evenly through progressive taxes? That in itself creates the tax-loophole incentive, so it seems the alternate minimum tax should be revived and strengthened.
10
I am just hoping that some of the US banks get their comeuppance on their involvement in this heist. No US bank head paid a price for the 2008 financial collapse originated in the US and that had global impact. Obama and team did not pursue the culprits and those men (yes, all men) still run many of the large US banks and rail against socialism. Socialism to them is anything that affects their pocket books. So shifting of wealth from ordinary Americans to the top 1% (many bankers) is not socialism, but, taxing their astronomical wealth even a little bit is socialism. I do hope these men get what they deserve - a little punishment for robbing governments!
56
@Sudha Nair these US banks will be asked to pay a fine that's smaller than all the money they made in this scheme. And that will be the extent of their comeuppance. It happens every time; no reason to think it will be different here.
11
Rock solid reporting! Thank you for putting so much into this; part of the reason I support and trust the NYT.
Is there a resource to learn more about which American banking corporations were involved? This way I can ensure not to support them. Thanks!
38
@Ryan
I share your thoughts about the NYT wholeheartedly.
6
Several decades ago, I had an idealized body type. My testo-related measurements were 36-19-36. My body sometimes compelled me to dress in a manner that revealed these dimensions, as to not do so would be considered a denial on my part to use the power of my body to advance my position in the world. This body exposed me to the testo-type being described in this article — I often walked away from enticements to sell my body to the richest bidder. I was instead attracted to an engineer who preferred to take his lunch on top of a nearby building so he could be closer to birds.
In my professional life as a designer, I ran into a variant of this social disease, as I wrestled with the need to assimilate the values of my patrons in order to serve them well, finally recognizing that their coveting of creative abilities had much to do with creating envy in the heart of friends and acquaintances.
I wanted no part of this. As a consequence I chose to live a humble life, finding personal avenues to express my skills. The humility that must be sustained in order to nurture idealism throughout a lifetime is not to be demeaned. There are women who have been faced with similar choices, who have not chosen the best path. Tragedy must be introduced into their life if there is any hope of restoring their humanity. I hope the legal teams assembled to dismantle this immoral and greedy enterprise well also succeeded at introducing humility into the lives of those facing their wrath.
8
It reinforces my belief that no great fortune has ever been made without taxpayer/government money.
Railroad fortunes built on land giveaways.
Mining fortunes from public lands.
Tech riches built on the govt's internet and space technology.
Pharmacy fortunes built on taxpayer-funded research.
And none ever pay a decent royalty to the governments or the taxpayers who built the foundations for their incredible wealth.
111
@Ed
Absolutely, the government made capitalism possible and profitable. It created the laws that initially made the serfs part of the land they could not be dislodged except by choice.... but when they ran awy to the cities where they became factory workers. and the land was now that of the lord of the manor to do with what he wished.
Why the American (and French) RevolutionsSo far as the lousy banksters and Wall Street. Since Reagan life has been a bowl of cherries for most. The FED will not raise income rates and is thus complicit. Trump is simply the manifestation of the disease... he's not the disease which is wide spread.
5
It was a lot simpler:
US owner of stock lends to bank who then lends to on on shore holders over dividend ex date. Holder claims the local tax credit from tax authority which is shared with bank and US owner. Stock is returned the next day. US banks were fully involved.
28
It is easy to see why the ruling coalition government in Germany is waiting for the dead end before calling for new elections. The left and right will make large gains ending Germany's ruling elite for the near future. Europe has had an ancient regulatory system and incompetent governments. As bad as our system is these bad actors were afraid to try this scheme on this side of the Atlantic. This is an important point described in this excellent article.
7
A highly simplified explanation of what I think happened, probably incomplete or simply mistaken in places.
In Germany taxes on dividend payments are deducted at source. If the person receiving the dividends is exempt from paying those taxes, they are reimbursed by the government.
If shares are sold or otherwise moved between two people at the time the company records who owns the shares for dividend purposes, both people will be recorded as being owners.
However, the person selling will have received the dividend and the person receiving would not.
The bank handling the trade for the seller will issue a certificate entitling the seller to a tax refund.
Weirdly, the bank handling the trade for the person buying the shares would also issue a certificate entitling the buyer to a refund, even though they never paid the tax in the first place, because they were the owner of record on dividend record day.
So the government would refund double the taxes received and the person buying the shares would just be handed a pile of free money.
All this was done on-line, computer to computer with the government, with no human oversight.
35
@one-eighty
Not quite no human oversight-- probably no honest or thoughtful or careful human oversight: someone wrote the program leaving out crucial steps. (Same problem with self-driving cars... the human factor.)
2
Too bad the article does not discuss the basics, "two refunds for dividend tax paid on one basket of stocks." In our system, dividends are not deductible on the corporate return and are taxable on the return of the person holding the stock. We do not have refunds on "dividend tax paid." We would simply have a refund on total taxes paid, with ordinary dividends paid at a lower rate.
So under the European system, how does one get even one refund on dividend taxes paid?
8
What is the difference between this heist and the Pentagon spending hundreds of billions of dollars every year on unauthorized wars that provide no benefit to taxpayers?
10
@Aaron The Pentagon, at least, is providing jobs and demand for the production of the materiel it uses. These tax heisters did it all for the private gain of a few individuals, with no benefit to anyone else. Not that all that the Pentagon is doing is great, necessarily, but that's another conversation.
It would be better if the human tendency to find and exploit loopholes would be put to better use, but greed seems to always be the strongest motivator. Followed closely by the thrill of the chutzpah to pull something off. The sad part is when the easy money comes rolling in and the higher-ups, who should know and act better, push the whistleblowers aside until the bubble bursts. May their punishment be as low to the depths as their euphoria was when they thought they were on the top of it all flying high.
17
Well put. Thank you Patrick.
1
London is the world's centre for money laundering, tax evasion and general financial crookery. Thta's even with the benefit of a degree of EU regulation and oversight.
Standby for more... One of the supposed 'benefits' of Brexit is the 'casting off' of those European shackles. Freedom to make 'British rules'. And, the opportunity to avoid the new EU anti- tax avoidance rules that come into general effect this year.
Make no mistake. The City of London knows that Brexit will lose it lucrative Eurotrading positions. Doubling down on irregular financial conduct will compensate for that loss, amply.
Criminals in suits. From all over the world. Including several hundred thousand Americans.
93
@nolongeradoc
...but the overwhelming majority of honest people who live in London voted against Brexit.....
2
Good article on a complicated subject. Maybe journalism isn't dead after all.
Strange that these supposedly smart finance guys don't understand that eventually you ALWAYS get caught. That doesn't mean a lot of damage won't occur along the way, unfortunately, but it can't last forever.
30
It’s not because the article punts on exactly what was done so the reader can not evaluate. International Tax is a very complex subject but I suspect what was done was not reported because either the reporter couldn’t understand what was done or they did not push hard enough to get an explanation. By the way, this is a recurring issue in almost all reporting on complex taxation. There’s certainly a need for reporters who can convey this complex information to a lay audience, just as is done with science, medicine and other complex subjects.
14
@JMB Knowingly tricking the government into giving you a double refund seems good enough in order to evaluate. Then doing that up to $60 billion makes it really easy to evaluate. Technically how this was done would be interesting but certainly not required for making a judgement.
19
@David ALWAYS get caught? I strongly suspect that is far from the case. Every once in a while something like the Panama Papers leaks out and some are exposed. A few of those are eventually forced to give something back or rarer still actually get some amount of prison time. How many of them end up financially ruined, and how many are just somewhat less wealthy? The sloppy, too greedy and unlucky get caught. Many, if not most, quietly get away with it, I guess.
16
I'm interested to learn that these bank (or tax?) scammers decided to avoid US banks because of the regulations and focus their nefarious schemes in Europe and London because we are generally told that our banking laws are pretty lax.
8
@Katrin
I was told the bailout was actually for the benefit of the European banking system which was about to collapse. That said, Obama is a fraud just like Bush (Both knew-- and aided friends in need.
I love Nicholas Ortega’s illustration for this article. Please extend my hearty congratulations to him for the beauty and innovation of his work.
12
Legal? Probably.
Moral or ethical? Definitely not, but hey, there's a bucket load of money to be made, so let's do it.
Welcome to unfettered capitalism...
19
@Greg
One feature of German (and most other Continental) law is that, unlike our system, something that "offends the conscience" can be deemed illegal even if the law is not specific as to that matter.
2
Schemes like this and others have been a cottage industry for as long as tax has been enacted. The question is why do lawmakers/regulators allow these scams to continue? (we know the answer...greed. the 1% pays big money for laws that they can abuse and profit from.)
And the really BIG question is why did it take a newly employed clerk in Germany to figure out that huge tax refunds to an individual is a red flag that warrants more investigation? It's the OPM (Other People's Money) syndrome that plagues governments and corporations...when the 'owner' of the money is not fairly represented when expenditures are made.
What is so wrong about just wanting a fair, level playing field?
39
Tax evasion has reached critical levels with the election of Trump. It isn't surprising that American investors were drawn to this off shore tax evasion scheme. In fact American bankers were involved in designing the scheme.
20
@c harris
It also isn't surprising that when the opportunity came to act it was a European court.
That could never happen in the US under the uber-pro-business bias of the Supremes and the well established judicial impotence of Stare Decisis Roberts in the face of business pressure.
21
We "pedestrian" victims must remember something about Trump, which I'm perpetually reminded of. He may be among the wealthiest in the West but he's also one of the unhappiest. He's a tornado of fury who knows only how to fire people and tweet to try venting. And given how he's been tweeting more and more over his presidency, firing off sometimes scores of grammar-challenged rounds a day, it's not working. He's clearly a man controlled by his meanness and unceasing greed..
Donald Trump is the best advertisement out there for that embroidered cliche about money not guaranteeing happiness. Why on earth would you want to be like him?
5
Greed, greed and more greed. Young bankers and consultants coming out of college are indoctrinated into the culture of wealth. The goal is individual net worth in the tens of millions of dollars. It’s a perversion if success that is literally destroying the planet.
26
These guys are crooks and deserve to be in general population with the rest of the criminals once convicted. If these white collar types were worried about more than a fine they might be more hesitant to commit crime.
24
The poorly regulated City of London and its freewheeling, high living bankers, investors and lawyers behaved as predictably with the cum-ex trades as they did during the the Libor (London Interbank Offered Rate) scandal which came to light in 2012.
If the City of London needs a “motto” right out of Dickens perhaps it should adopt “Please, sir, I want some more.” ( minus the “please”)
13
Why is it necessary to point out the Mr. Mora is obese who likes patterned shirts?
8
@Todd Maybe because he dressed as an outlier in chilly London, just as his banking practices. He thought he was able to dress so far outside the norm, just as he thought he could conduct business outside the norm
7
@Todd This is important info for the casting and wardrobe of the upcoming movie.
3
@Todd To help people identify him from past exchanges? Generate new leads?
3
I find it interesting that the words fraud and Merrill Lynch always seem to appear in the same sentence throughout history.
80
@Kevin O’Brien If there's anything shady going on in world finance, Deutsche Bank is right there with them too.
24
I believe it was Bertolt Brecht who said “What is the crime of robbing a bank compared to the crime of owning one?”
29
I would place a penny tax (or so) on each individual stock or bond sold - so those items can be traced back to the seller and buyer.
I'm sure there are think tanks that really, really want to create a VAT for goods made/sold in the USA - essentially a sales tax at many levels, that would (eventually) replace the income tax. Why not propose a sales tax on stock sales to start paying down the overall debt? If you chart the number of billionaires in this country, I'd think one could show a direct correlation between the Federal deficit and the amount of billionaires. It would work better than trying to tax wealth.
14
@Dave S
Yes, we all know so little. Bring back the estate tax at a lower level, the luxury tx-- 10% on that 400 million paintin yeilds 40 million..Krugman has totally forgotten it and it's very hard to research.. maybe Lexus Nexus. and wealth taxes on estates are not at all hard to administer.
2
Gee, some of the very same companies involved in the 2008 global financial slam just moved their criminal operations overseas. Huh. Go figure.
That bailout and dearth of criminal prosecutions really taught them a lesson.
35
This article squarely pegs a man named Gregory Summers. A quick internet search finds that he has been praised by several local colleges as being such a wonderful donor and such a great man. If in fact he is guilty of playing the cum-ex game and stealing taxpayers money, that makes me sick to my stomach.
23
"City of London, Britain’s answer to Wall Street."
Dear oh dear.... I think you'll find that it's the other way round. 'The City' has been the sole, or shared, center of world finance for the best part of five hundred years.
14
it seems to me that underlying this egregious crime spree is a culture, imported to london from new york, ie. america, that despises and looks down upon government (and the normal everyday people it is actually constituted of, and supports) as bad/evil. a viewpoint that was an american, and specifically republican, invention, to justify enormous tax cuts for the wealthy, which particularly grew during (and due to) the reagan era. it is this kind of attitude that enables financiers to justify to themselves acts like this and also all the financial acrobatics (CDOs and the lot) of the 2000s. and thus it seems to me that until we stamp out this pernicious, society-destroying view, and replace it with the truth that government is constituted of US — of the people, by the people, for the people! — and is GOOD, and that it’s the private sector which is evil and needs to be regulated, that we’re only going to see more permutations of advantage-taking from the financial “industry” (more like, pox on our society).
36
@a. Wish I could like this a hundred times.
1
There would be an international remedy for these fraudsters: Every financial instrument is illegal unless approved by the SEC (or its equivalent).
You can hold financial assets at closing date at two or more places by simply riding time zones. A seller can sell in Frankfurt on January 1st, while the buyer in Los Angeles receives it still on December 31. Magically, the same asset ends up in the books at two different places. Likewise, you can shift profits or 'loose' assets along the way.
Hi-speed trading is my favorite scam because it 'taxes' investors on their own trades. The system relies on brokers' insider advantage from a fraction of a second information delay. These hi-speed brokers should all be in jail for theft.
But scams are popping up everywhere. Amazon.com participates as a supplier in its own e-commerce platform, thus having access to and relying on information that competitors do not have. Even though it is 'internal', its competitive advantage relies on information 'theft' (transfer) that merits jail time.
Information advantages lead to new scams that will squeeze the lemon ever more.
The rigged systems need to be changed.
A.J. Deus
Social Economics of Poverty and Religious Terrorism
24
The Europeans are being fleeced by bankers from Wall Street or those trained by Wall Street firms. The greed of these firms and their employees is out-of-control. And the US taxpayer is the one who bails them out when their schemes fall apart. Pres. Obama's insistence that the DoJ not pursue criminal charges against the US banks at the heart of the GFC was his primary failure as a President.
As long as the US political system is funded by donations from private individuals and corporations to PACs, Parties and candidates, we will have this type of corruption and malfeasance. The politicians no longer represent the voters interests, they represent the donors interests. The laws are written by corporate lawyers and the highly-paid lobbyists. We as a nation are at serious risk of losing our representative democracy as our governing manner.
And this issue is not partisan as it transcends both political parties.
28
Deutsche Bank is mentioned in the article; I can see why trump just loves Deutsche Bank. Someday we will find out the details of that relationship.
46
Yes, and as I understand it, Russia backed the Deutsch bank loans. Source. If I recall correctly, A NYT article that I could surface if useful to you. R 24. Jan. 2020
5
@Ed Andrews - are you kidding? Don't hold your breath.
1
Didn't break a law? Whatever happened to that ancient law, "Thou shalt not steal"?
32
I hope the evolution of block chain technology can reduce our collective risk to this type of financial manipulation. Several verification sources could have nipped this in the bud before nations lost billions. More "kindergartens" could have been built.
5
neither block chain, nor any other technology solution, is going to save us.
9
@Buck Biro I expect the exact opposite to be true. Data distribution so that no single entity can see what's going on will make the rip-off easier and the laundering a piece of cake.
14
The entire structure of global finance, which is based on one simply principle: interest, is a sham and and a scam and will repeatedly be circumvented by those with the "right" knowledge to the immense detriment of all taxpayers worldwide. As governments succumb to the globanks (globally-linked banks, multinationals, etc.), more tax money will become available for plundering.
There is only one way to stop this tumorous thievery: do away with interest entirely. Money should never earn more money; labour and or barter of goods alone should be equated with money. The ultra-rich would disappear, as they would need to produce either labour or goods. The unfathomable inequity in personal wealth would disappear, as one person is only capable of working so much. Interest, more than anything else, is what creates billionaires and cuts populations into lower and upper castes.
21
The more complex a system is, the more loopholes there are and the more difficult it is to detect them.
There really is no fundamental difference between the complex global tax systems and how they are interconnected and a computer operating system. At some point, they become so complex that hacks go undetected.
Basically, those guys just hacked the tax regulatory system and they got away for years with that hack.
Happens here in the US all the time, but on a different level. The IRS is losing billions each year due to fraudulent refund claims where the fraudsters steal the identity of taxpayers, file a phony claim early, get their refund and this is only detected when the real taxpayer tries to file and the IRS tells them they already did file and the (fraudulent and inappropriate) refund had been issued.
What I would like to know is why is the US not doing anything about THAT? Is it laziness or incompetence?
14
@Captain Nemo
A simple way would be to wait until tax day in April before the refunds are being issued, and only issue them to verified bank accounts that match the name and credentials of the filer. Two returns that have been filed, with one requesting a refund to a non-matching destination, would immediate raise a flag, thus preventing that scheme from working.
8
@Captain Nemo Not laziness, some incompetence. Mainly it is the anti-tax and anti-government sentiment that drives one of our political parties.
11
@AMGOMG
This has nothing to do with anti-tax or ant-government sentiment. I am very confident, that there is COMPLETE bipartisan agreement that actively defrauding the IRS through identity theft should not be tolerated. No sane politician would possibly say otherwise.
I do not understand why this clear-cut problem is not tackled, instead of writing more and more byzantine rules that nobody understands anymore and make matters so complex that schemes like the one described here become possible.
That scheme only unraveled when a lowly German IRS official used her common sense and asked questions, mainly because common sense told her something was not right.
We should also use our own common sense and make sure a much simpler and obvious fraud scheme affecting thousands over thousands of US taxpayers is prevented. One of my friends was hit with that, he is still in a clinch with the IRS who now wants the money they paid to a fraudster back from him. We need the government to protect the citizens, not themselves.
9
This is redolent of that 'financial services' debacle featuring 'credit default swaps' and 'sub-prime mortgages' which nobody seemed to understand but from which many profited bigly. If it's THAT difficult to explain, it's probably illegal.
22
@Cody McCall Not that hard to understand. Just a convoluted shell game and expensive lawyers.
7
If anyone is interested, this link is a document from the IRS describing in detail a "dividend arbitrage" transaction. I didn't read through the whole thing because I don't have time, but suffice it to say: it's complicated.
Enjoy.
https://www.irs.gov/pub/irs-utl/am2012009.pdf
9
This article makes me yearn for the good old days when the outraged peasantry would storm the castle with pitchforks and scythes and lop off a few heads. Sigh.
17
@F. O'Brien Most pitchfork oriented folks these days are found in Trump rallies where they are told government and foreigners are the problem. Be careful what you wish for.
15
White collar crime prosecution is expensive but, duh, so is the pain inflicted. These crooks just feel entitled. What’s the problem with making them feel the pain?
19
Elizabeth Warren is looking better by the day.
97
Sanders will take these scumbags out as well. The keys are independence from the financial elite, a progressive world view, and integrity. I will be thrilled with either (both?) of them. The others will mean business (theft) as usual. A disspiriting prospect.
6
All should be required to pay back the money, in particular Sanjay Shah
11
@Demian, perhaps they're going to have to pull off an MBS ordered like maneuver such as happened to Khasshoggi in Turkey.
The course load to earn an MBA should include 95 units of ethics.
26
I cant help but wonder if our illustrious presidents name will ever show up in this. If it does I certainly wont be surprised.
20
A mystery that I will never truly understand: why is it that the more money a person has, the less willing they are to pay taxes? I know this is not a universal rule but there are so many instances of it holding that it is at least to a degree true. If there is a positive correlation between wealth and intelligence you might suppose that wealthier folks would understand that taxes are a necessary contribution to the functioning of a decent society. You know, support for schools, hospitals, roads, law enforcement, etc., etc. But the existence of a fat bank account seems to do something to rational thought and ego and greed take over.
214
@ME
Both phenomena have the same cause: GREED.
A few thousand global billionaires now own half of everything on Earth (including controlling shares in these thieving financial institutions). They are not productive enough to have created half of everything. That is proof that they stole it.
They try to blame it on the poor, but the poor don't have the money.
The people that have the money, stole the money. It's called mathematics.
"They didn't build that." They stole the productive of the worker/consumers that actually do the work to create the wealth, and actually but stuff to create jobs.
Yeah or productive back from the global thieves.
36
@ME I so agree. After traveling the world for business for 25 years, I never complain about my taxes. I am so happy for clean water, good transportation, and sewer systems. I just wish we could figure out the education and healthcare.
29
If one’s goal in life is the pursuit of enormous wealth, the decision has already been made about “fairness”. As the mantra goes in Wall Street, “Greed Is Good”.
15
And the saddest part of this entire story, is that we bail out these banks when they are in trouble, and will do so in the future.
82
@Glenn
The Federal Reserve spent a decade giving away a NET of $3 Trillion to global banks during their QEII program. (That is interest on $19 Trillion in zero interest loans plus paying list price for their worthless Collateralized Debt Obligations that crashed the economy in 2008).
That comes to $9,000 per US citizen, or $36,000 for a family of four, given away to going banks owned by going investors. (We know about all of this because Bernie Sanders got legislation passed for the first audit of the Fed.)
The global billionaires, including Trump, Bloomberg, Murdock, Soros, Besos, Zuckerberg, etc., are manipulating All markets (see the many slap-on-the-wrist convictions over the last decade), news (they own controlling shares in ALL mass news organizations AND alt-right news like Brietbart), and government (making most of the donations to candidates).
We the People have been taught to worship those who are stealing our economy and our democracy.
They say that Bernie is "divisive" because he calls or billionaires for stealing. Bernie is not attacking the individuals. He is attacking their immoral actions. The Right attacks individuals based on their identities. That is divisive. The Left attacks criminal behavior and demands that it stop. That should be unifying, except too many people believe billionaire news when it calls everyone that opposes theft "extreme."
Billionaires are the extremists, not those that want to stop them from manipulating or political-economy.
21
@McGloin
I bet you anything that Trump is NOT a billionaire in spite of his claiming he is.
5
Hmmm - and exactly why is regulating and taxing financial markets a bad idea??
Warren 2020!
155
This is clear evidence that we humans cannot be fully trusted, corruptible as we are when no one is watching, when individuals in power do as they please...for lack of public supervision and healthy regulations...and allowing 'ethics' to fly away...to give room for selfishness and greed to call the day. Given the promiscuity of these abuses, how come we never learn?
14
It's unfortunate that there's no explanation of how the trade worked.
8
@AGuyInBrooklyn From the wikipedia article on the investigation "The participants in the network would lend each other shares in large companies, so that to tax authorities there would appear to be two owners of the shares, when there was only one. The bank that was used in stock trading would then issue a "confirmation" to the investor that tax on the dividend payment had been paid, without it being done"
11
@AGuyInBrooklyn Not that complicated except for all the layers of confusion designed to fool tax authorities. You too can cheat the IRS by lying and your chances of being audited are minuscule.
5
@AMGOMG Except for Trump who's always under audit.
1
Wall Street does it again, greed and arrogance rule. We need to nationalize the banks, Wall Street is playing us, again, and again, and again. Start jailing these people with long term sentences, no parole and banish them permanently from working in finance.
54
@Steve
And where it most hurts: seizing their ill-gotten assets.
5
“Whoever has a problem with the fact that because of our work there are fewer kindergartens being built,” Dr. Berger reportedly said, “here’s the door.”
It's the same macho thieving mentality that brought us the Enron traders proud of their venality: "All the money you guys stole from those poor grandmothers of California?" "Yeah, Grandma Millie, man."
But this arrogant, self-righteous, amoral defense of free-market stealing can be heard every day on Fox Business and CNBC. Today, they are trying to elicit sympathy for themselves and Trump in the face of what they see as "dangerous rhetoric" from a Democratic field mostly engaged in a rather polite critique of such abuses.
They live in their own bubble where these attitudes go unchallenged.
144
@DLNYC
Yes, that bubble is called For News and the Wall Street Journal.
7
Let's make sure they learn a hard lesson from America and our 2009 Bankster crash and do less time than a common thief. Not ONE single bankster did a day in jail. After all the best way to deter such greedy behavior is to reward it by offering only collective punishment from share holders and not individuals. History is doomed to repeat itself
29
Sorry. No details. For that you pay extra.
The groundwork is laid. People are intrigued. Time for multi-state seminars on "Getting back your tax money!"
6
@JMK Easier to make money by going on late nite cable and telling people how scared they should be of the IRS and that only you can negotiate with the greedy monster. Thousands of eager innumerates that can't afford it will throw money at you so you can spend a couple hours on the computer and on the phone and fix it.
These thieves decided not to ply their trade in the U.S. because of its banking regulations. Looks like regulations work after all.
56
Wall St was the New World's answer to the City of London, not the other way around I'm afraid.
8
@Robert There is a reason the Brexit boys wanted to be free of European scrutiny. 'The City' of London was/is the capital of tax evasion.
43
@Dwight Jones Just like Delaware is the CENTER of global money laundering. The Laundromat is an interesting quick view.
9
The fact that so many people knowingly participated in the scheme is not at all surprising. Far too many people in the financial industry adhere to the ethos that accumulating great wealth is a beautiful goal and that anything that gets in the way of that pursuit is to be torn down if possible, regardless of the costs to fellow citizens and society. It is greed and avarice on steroids. imagine the hypocrisy of those among them who go to church, the mosque, the temple, or the synagogue. For them especially, hopefully a special place in jail that is cold and harsh awaits them. It will give them plenty of opportunity to reflect and repent.
40
@Dan
Do you really think they will spend any real time in jail. There is enough history of financial industry crime showing that the perpetrators do not spend any real time for what they did and if they do spend time in jail it is in comfortable digs.
5
@Vail
The amount of time they spend in jail depends on what the rest of us do. If you say that it is impossible to stop them, it will be impossible to stop them.
You have to try to stop them.
5
Let's do the math. Thee people are stealing from every legitimate taxpayer, whether you pay income tax, gas tax, or any other federal tax.
In a place like Germany (population 82 million or so) that would probably be about 40 million taxpayers. At one minute jail time per taxpayer robbed, that is 40 million minutes, or a mere 76 years.
Sounds about right.
In the US, with probably about 100 million taxpayers (given that our tax laws are more relaxed than in Europe), that would be a sentence of 190 years.
Sock it to those guys.
You want to rip us all off? We all get our one minute of "payback." Sequentially.
80
Rinse and repeat.
Some months or years from now, we'll be reading about the next variation of some tricky financial scheme dreamed up at a bank that defrauded us, you, me, them - with all the usual trimmings of shock and outrage and calls for regulation.
The perpetrators will not go to jail. They will lose only pennies on the dollar in fines. We will be lost in the details. We will move on. The next generation of fraudsters will be encouraged.
We need Ferdinand Pecora publicly exposing Jamie Dimon and pals. We need to drive some banks out of business.
We need to send people to jail.
293
@Ernest
Well said
9
@Ernest
Given how many dedicated participants have been netted, it's much more likely to be months, and not years, until the next scheme is uncovered. Remember, it has taken more than a decade for the law to catch up with cum-ex. It's pretty clear that the "next one" is already here.
2
@Ernest
These fraudsters don't understand the prison as punishment. For them it would merely be a "sabbatical" in a comfortable federal prison suite.
The only punishment they are afraid of: SEIZING THEIR ASSETS.
9
So for 5 years government officials and those responsible in these counties to be accountable for finances just let these refunds happen?
Perhaps these governments should have been more focused on their financial issues than social media issues like Climate Change...
3
@MDCooks8
well...maybe, but you can't build a bank in a flooded city or a burning forest. Nice jab at those of us concerned about the broader picture though.
28
@MDCooks8 Is that a strawman or a non-sequitur logical fallacy?
12
@MDCooks8
The time line goes something like this.
Year 1 - you file your taxes on April 15.
Year 2 or 3, maybe 4 - you get audited, and there is a "deficiency" in your taxes.
Year 5 - your accountant and lawyer argue with the IRS.
Year 6 - after a decision you do not agree with, you go to appeals within the IRS
Year 7 - if you lose at appeals, you file a lawsuit, which takes a few more years to resolve.
All that time you are sitting in the winnings from Year 1, and Year 2, and Year 3 ... and Year 7 or 8 or 9.
If you lose, you get to pay up. IF. YOU. LOSE.
Don't believe me? Ask an IRS agent. I know a few.
There should be an extra penalty (like a factor of 3 times the amount you claimed, plus jail time for really egregious cases of outright fraud) for repeatedly engaging in what is finally deemed a tax scam.
27
With inequality at 1920's levels, the Homeless population approaching a million, and 87,000,000 un- and underinsured right here in the Homeleand, we've let the Wealthy skate for far too long.
It's well past time for a (2%) Transaction Tax on Wall Street, America.
120
@Willy P,
How about enforcing existing laws and closing tax loop holes before we venture into an unconstitutional tax program?
11
@Michael
When did you repeal the sixteenth amendment to the constitution?
6
The distinction between US and European financial regulations is: in the US, you can do anything unless it is expressly prohibited; in Europe, you can only do something if it is expressly allowed.
12
@Len319
But they were pulling this off in Europe and not the States. Indeed, they did it there as they were more afraid of US regulators.
3
@Len319 Please provide example of anyone convicted of a financial crime that is not explicitly designated as a crime. I don't see jails, here or in Europe, full of brokers and accountants wrongly locked up for violating unwritten laws.
@Len319 This comment sounds smart but is meaningless in this context. The scheme was perpetrated in Europe; not the US.
People of low morals taking advantage of a set of people with low intelligence.
Want to bet that the bankers and lawyers were not the only ones with low morals?
Can't wait for this trial to unfold. Do report back, please.
15
Obama let the banksters off because they were/are funding the Democrats' political campaigns. So we were bailing them out with our tax money and they were fleecing us at the same time! What a symbiosis between the politicians and their bankers. It is so disgusting.
5
@Valentin A Obama you say? What then is/was Europe's excuse for the bailout? And how then do you justify the massive tax break that Trump/McConnell just doled out?Greed knows nothing of political allegiance.
16
It would be nice if you offered any facts to support your conclusion that Democratic politicians were the only beneficiaries of banking industry funds. Somehow it’s hard to imagine that such corruption would not also include Republican politicians.
19
The mind of a Trump voter is a terrible thing.
10
You know - we need FEWER federal government regulations so the 1% can continue to steal from us stupid, pedestrian people.
176
@Brian
To me it looks like this ploy only worked, because there was such a thicket of regulations that it became impenetrable. There is only so much one person can pay attention to before information overload let's things that should have been caught slip through undetected.
In computer lingo, I would call this 'stack overflow'. After that, the system is vulnerable and open to hacking.
Fewer regulations that follow common sense rules, not more, actually would make the tax system much less vulnerable to exploitation. The transgressions would not be able to hide in open sight.
I see this every day where we spend literally $$$ to make sure the cents tally up exactly. That results in financial reports that are so insanely detailed and overly complex that I honesty have to say, there is no way for me anymore to swear to their accuracy anymore. I can only confirm ballpark accuracy. Accounting is caught in a neverending cycle of revisions and corrections that make it impossible to perform any accurate (!) audit. In the end, the cents will be correct, but a million $ may be missing. Bottomline, the more complex you make a system, the easier it is to hide nefarious activity.
Simplify! Cut unnecessary regulations. Pay attention to what matters.
10
@Captain Nemo
"Bottomline, the more complex you make a system, the easier it is to hide nefarious activity."
Very astute comment.
2
When white-collar crime is punished with the same ferocity as blue-collar crime, it will lessen. Plus it shows the hoi polloi that the system is serious about leveling the laying field and protecting fairness for all. White-collar depredations and leniences go a long way toward convincing the middle and lower classes that the game is rigged against them, leading to awful nationalists/populists who take over governments based on faux promises and yet continue the corruptions.
Lock. Them. Up. & Claw back. Hard.
175
@Theo D -- yes. When Obama didn't go after the Banksters, he pretty much set the tone for the times to come.
Time for some comeuppances.
3
“That was the normal world to which we no longer belonged,” he told the reporters. “We looked out the window from up there, and we thought, ‘We’re the cleverest of all, geniuses, and you’re all stupid.’”
--------------------
Orson Well's murderous con man Harry Lime from The Third Man, looking down at people from a Ferris wheel:
"Victims? Don't be melodramatic. Look down there. Tell me. Would you really feel any pity if one of those dots stopped moving forever?"
73
A couple of observations. First of all, fault lies with legislators who write opaque laws that clever operators can manage at will.
Second the fault lies with auditors who don't reject far fetched interpretations to begin with. Don't try to prove them wrong, have them try to prove that they are right.
Finally, if anyone doubts the importance of regulations, especially in market and finance matters, he is in favor of having his pockets picked.
48
@Frank Casa We need Elizabeth Warren to reign in corrupt capitalism in the USA and perhaps turn around our environmental goals for a better future
19
@Frank Casa Please keep in mind that a lot of legislation is drafted by "think tanks" and other special interests who offer them free of charge to understaffed and underfunded legislators, not all of whom are stupid or corrupt. If we are to craft better laws we have to pay for them, either by funding the effort or participating personally when we have the relevant skills and experience.
3
@Frank Casa
The fault lies with those that manipulate the system to steal.
And, yes we need to regulate and prosecute that's that steal.
3
These same pious people like to talk about Food Stamp fraud and Medicaid fraud over after -dinner Scotch. I won’t mention their usual political party affiliation. Yes, you guessed correctly.
They often are the society page notables who give from their “profits” to worthy cultural and academic institutions!
The $$$ is dirty but not criminal like stealing sneakers.👮🏼♂️👮🏽💰🛑
256
@Whatever
I hope it's a single malt and a limited edition- the scotch... and some Debauve and Gallet chocolates.
@Whatever
...make that a $1,000 bottle of "after dinner Scotch."
1
When is it finally going to occur to our authorities that the bankster class is and has ever been corrupt. Jail them and take away their operating licenses..
24
Another reason to consider Elizabeth Warren for the presidency.
245
@Hisham Oumlil She'd be better in the Senate for this.
1
Lock. Them. Up.
Lock up all the evaders and thieves.
All the international criminals.
The fixers of the LIBOR.
The raiders of pension funds and public works.
45
Simply another reason to distrust the "integrity and honesty" of big banks, stock traders and the financial world in general. How many times in the last few years have we, the "sucker" public heard about such schemes hatched by the "Masters of the Universe" set? How many of them will actually go to jail? How much money will actually be retrieved? It's pointless to expect government regulations will stop this...particularly in the U.S. where the government and the Wall Street/big bank revolving door operates 24/7. Of course, we now have the least trustworthy person in U.S. history in charge...someone who believes paying taxes is, again, "for suckers".
65
@Etienne
No it is not pointless to regulate traders or arrest those that break the law.
What is pointless is to expect them to regulate themselves, which is what the Right keeps telling these companies to do while they deregulate them and fire regulators.
You can't make a class full of High School freshmen stay silent for long, but if you never tell them to be quiet, or impose consequences for the worst behaviors, then pretty soon they are running around, yelling and throwing things at each other.
Just because there will always be greedy thieves on Wall Street, doesn't mean we should just let them run wild.
5
How is it possible to write an article this long without even attempting to describe how the scam worked?
140
@Louis Schorsch agreed -- I would at least like to know the mechanics of a legal dividend tax refund.
11
@Louis Schorsch Financial institutions in essence exploited a legal loophole which allowed two parties to simultaneously claim ownership of the same shares, therefore allowing both to claim tax rebates to which they were not entitled.
The participants in the network would lend each other shares in large companies, so that to tax authorities there would appear to be two owners of the shares, when there was only one. The bank that was used in stock trading would then issue a "confirmation" to the investor that tax on the dividend payment had been paid, without it being done.
--Wikipedia
48
@David Rose thanks for this explanation. It's still hard a bit hard for me to really get it. Would it be like 2 people both claiming the same winning lottery ticket at two different claims desks at the same time, and then only 1 of them paying taxes on the winning ticket while the other does not?
6
So my country lost 2 billion dollars to man wiht a boat named "Cum EX". Meanwhile cuts are being made many places in the public sector, and the man fled to safety in Middle East. Germany lost 30 billion, USA lost 100 billion every year, and yet people keep saying, there is no victim, no one was hurt. I say they hurt me, you, everybody in my country, and yours too. I think it is time to break up the big banks, and punish the guilty people, even in the Middle East, or in Switzerland.
296
"if Germany didn’t make the trade impossible, they did not break a law"
Only in the world of finance could such a breathtakingly stupid idea gain traction. Imagine if a normal taxpayer tried to use that justification:
"I was literally *able* to lie about my income on my tax filings, so it must have been legal!"
I hope they lock them all up. The whole world of finance needs a reminder that the ability to make money through shady means doesn't make one a genius - just a criminal.
155
@Ryan
Yes, or the store didn't make it impossible to steal that loaf of bread, so it's legal.
3
@Ryan, That "breathtakingly stupid idea" is not quite unique to "the world of finance". It parallels the defense of our POTUS currently being mounted in his impeachment trial.
1
Finally, Rikers has a purpose. Hire the outgoing inmates as CO's.
Strip the crims' family assets: reparations. Crush their clean white hands. Move on to the next: How to focus and enclose the endless war.
Have you heard the one about the Texas politicians who declare war on their former business partners? [As distinct from the war started by the sons of their current business partners.] The politicians contract the war to their former Texas firms and sell
US Treasury bonds to China to pay for it. With the full faith and credit of the United States, the offering goes so well, the politicians issue check to every taxpaying home, to raise spirits, to support the nation. "Go to the mall!' Go to Wal-Mart.
Deficits are just a number. Pay no attention to your lying eyes.
Remember to take your gun to the mall.
We have an honest President now. He said so.
11
Only four comments so far? If only sex had been involved, there would be hundreds. That is one of the biggest problems in our society-- real crimes -- on an unbelievable scale-- go by, without concern or real action, and without real consequences for the rich who benefit from them (I'm talking to you, Lanny Breuer and Obama). We all just shrug and change channels. It will take a Warren or Sanders to finally hold these criminals to account. But it's worse than you think-- this is about actions that are actually technically illegal. We are more harmed by actions that should be illegal.
39
@Bill Van Dyk
Warren/Sanders or Sanders/Warren in 2020.
It's time to make the Right beg for compromise for a change.
All of you that think this is a right leaning country need to go read the Amendments that were passed with super-majorities since the ratification of the Constitution. Almost all of the Amendments moved the country to the left.
The Right doesn't have super-majorities to rewrite the Constitution the way they want it, so they corrupt it instead.
Centrist Democrats who would rather compromise with the Right than the Left are helping them corrupt the Constitution, which tells voters to stay home because they are only given a choice between greater evil and lesser evil.
Those that want evil, vote for greater evil. Those who oppose evil are discouraged by the constant surrender on our behalf by centrist Democrats.
Being out the Left base to outnumber Republicans, overwhelm the electoral college and take control of the Senate
Compromise while getting nothing in return is surrender. Surrender is losing by definition.
When the Right calls themselves "originalists" it is because we originally had a king.
1
@Bill Van Dyk I am trying to understand your choice of Obama as an example of the entitled rich, especially in light of the current political/financial environment in which we live.
Cheating and scamming is the name of the game today. I hope justice will hound these criminals and taxpayers can get their money returned and the schemers convicted and jailed. Will it happen? It never seems to happen. Time to take to the streets, let's try to do it in the warmer weather.
7
American leaders talk a lot about the threat posed by al-Qaeda, ISIS, China, Iran, North Korea, corona viruses, etc.
But Wall Street is a far greater threat. The Wall Street banks and non-banks are skilled manipulators with vast political and economic power, a lawless culture, and an unlimited sense of entitlement. They are vicious predators in our midst.
The Wall Street investment banks and mortgage lenders authored the 2008 financial crisis by their wild-west fraud-heavy conduct. None went to prison for it. Meanwhile their stealing continues. (Google up "Who snatched my car? Wells Fargo Did'" for an example.) It's long past time for real accountability.
504
@Roddie Edmonds People still bank with Wells Fargo! How scammy does a bank have to be before depositors pick up their money and go?
23
@Roddie Edmonds Maybe a Bernie kinda guy or gal?
4
@Roddie Edmonds
You call it Wall Street. I call it the current iteration of Capitalism.... (Rob Peter, pay Paul.) Should I complain? my AEP dividend went up by 20% but my gardener could not afford to pay his electric bill (which also went up). For 20 plus years banks have not paid appropriate interest rates and the FED consistently cuts rates-- can't do anything to interfere with the banksters. WJClinton got rid of the luxury tax-- supposedly its existence had made expensive yachts too costly to purchase ( never mind it's an international market). In the 1950s a $400 million dollar painting purchased at auction would have netted the govment 10 percent- 40 million in taxes. (How many little people tax dollars does it take to get 40 million in tax revenue.) Of course, no one really care do they? Melania nailed it. IMO it's probably immoral to own stock... and it certainly is immoral to make the stock market the only game in town which it is for too many people (raise the interest rate already.)
Why can't those who brought on the recession pay with both $$ and some jail time? (They got the Indian guy Kapoor for the InSys drug scandal... note key word -- not a WASP! The last WASP to go to prison for Wall St. crimes was poor old Martha Stewart-- but she's a girl and basically a Pole... so NOCD (not our class dearie).
Time to eat some chocolate.
31
Viewing government money as fair game for fraud is distinctly American. This is why Republicans want to privatize everything from schools to the military. When the the govt. is paying they are anyone's punch. Enforcement of tax laws under Trump has dropped to almost nothing. The republicans in the US have achieved a dream they have had since Reagan.
Please, once again, Europe show us how real countries function.
104
@Sean
And the number one person stuffing government (I.e. taxpayer) money in his pocket lives in the White house.
12
bankers should be able to make money going long or going short. they shouldn't be able to make money creating financial instruments or schemes that they only understand legal or not. Its so disappointing to hear stories like this because i want to give markets and bankers the benefit of the doubt. That bankers serve their customers and society at large with positive results. i don't even care if they only benefit the wealthy; it takes money to make money. Risk should be rewarded. however, this was a complete scam. ...as Thomas Jefferson said, " the bankers are more dangerous than standing armies."
13
As always, blame the Americans. Even when the central figure is a German attorney and former regulator, blame the Americans!
7
@mike Perhaps you should reread the article and see the American influence. It is very clear. Profitable ideas (even illegal ones) tend to travel fast.
21
Stop meddling and messing things up globally, and we‘ll stop blaming you.
13
Maybe Americans are blamed because they started the scheme.
9
Prank calls to summon SWAT teams to tech executives' homes is just the tip of a giant iceberg of resentment of tech, Wall St. and many others. There's going to be a backlash and I have to say I'll enjoy watching it happen.
30
I'm just curious what is a valid dividend tax refund? It sounds from the article like dividend tax refunds are legal but the scam was that there were two refunds being issued. Who is paying the dividend tax and why are they entitled to a refund in the first place?
45
@Matt My understanding is that if a foreign entity buys then sells stocks they pay a tax on gains, but to avoid double taxation from the home country and the transaction country they can claim a dividend tax refund. The scheme seems (I could be wrong here, but from what I can read) to be that trades were completed, but two refunds could be requested from the single trade.
14
If the tax on the dividend is levied in 2 different countries, one of those has to be refunded to avoid double taxation following determination of where the tax actually applies. This happens when businesses or individuals have tax liabilities in different countries. To preempt tax avoidance, many countries collect the tax on the dividends by automatic deduction at the source. It is then up to the taxpayer to reclaim the excessive deductions.
In this case it seems like they claimed the refund in both places, so no tax was paid.
42
@Matt My guess is they bought and sold the securities such that they never actually received a dividend (Euro companies typically pay semi annually) but the transaction dates made it seem like they did. So they were able to claim a refund on a tax that was never withheld. They probably timed the transaction around the ex-div date.
12
"We make money the old fashioned way- we siphon it off from the government". A lot easier and less risky than say mining or manufacturing.
We complain about the late 1800 industrial robber barons like Rockefeller and Carnegie but at least they provided something of value to the greater population, like jobs, steel and kerosene.
112
I often think of certain unscrupulous members of the Greater Wall Street community as financial vampires that prey on the general public's weaknesses wherever they can find them. In the dark of night if possible: if they can do so undercover by utilizing a scheme that has not been specifically prohibited by law. This case is a too perfect example of that mind set that always seems to affect certain parts of the Greater Wall Street community. I know Wall Street does great and indispensable services to us all, but there always seems to be this incredibly dark element there, waiting for the right opportunity to pounce. Devil's machine indeed.
15
Our entire global financial system is a scam. I am a licensed securities dealer and the entire system is fixed and rigged for the rich. This is just one of many examples of how financial companies rip off consumers and even governments. Did you know that so-called ‘accredited investors’ have access to special investment opportunities that the rest of us lack? That’s right. And who exactly are these ‘accredited investors?’ They are people with at least $2 million in net worth (minus the value of their primary house) and who are expected to make at least $200,000 in the coming year. The whole system is designed to make the poor poorer and the rich richer.
377
@Mike L I don't disagree that the poor are being ripped off by the rich. But the accredited investor designation is meant to protect the poor from participating in risky unregulated investments.
I would love to know what average returns accrediteda are getting compared to regular folks, but it is hard to track that info down. Some win big and some don't, I guess.
As part of our rigged and opaque tax system, it probably provides potential for abuse by the lawyer buyers; but until we get a serious economic make over and tax overhaul, I would keep the restriction.
13
@Mike L
"The business model of Wall Street is fraud."
-Bernie Sanders.
24
Come on, that's silly. The "special investment opportunities" are unregistered shares in private companies, often startups. Those accreditation thresholds are there to prevent naive investors with smaller resources from getting fleeced in an unregulated environment. Some states have provisions for intra-state investment that avoid these accreditation requirements.
23
With Trump President. The fox is in the hen house, and he is looking at OUR hens: social security fund, and medicare.
269
You're foolish to think social security and medicare weren't marked decades ago by politicians looking for additional sources of funds to spend on their own "pet projects."
11
@Rory Let us not be so foolish to give up on these vital safety nets and let corrupt politicians like Moscow Mitch McConnell close them down. Vote in your self-interest.
16
@Rory And here we are with Trump ready to pull the trigger. Stay in the here and now or get left behind.
8
Well, the tax system is complicated and loopholes abound. Looks like the authorities were aware of this problem at least a decade ago and they still couldn't outlaw it? Shameful. Perhaps it is time to revamp the tax system. It would have been nice for this article to at least try to walk the reader thru the nuts and bolts of this 'scheme'.
18
@Roberto Ah, yes, the "authorities" are shameful.
And not a word wasted on the organized crime perpetuating these thefts.
7
London’s Whales & Sharks,Allen Greenspan’s warnings about market exuberance and the corrupts in Bush Jr. administration determined to create ownership society in USA without income verification mortgage giveaways to all who applied for on backs of government secured funds for banks if they loose money for unverifiable loans. What it was then and what we experienced afterwards in 2009 market collapse,it’s bound to happen again. In corporate controlled nations like most now,the sharks & whales thrives well of swallowing small fish masses swirling around them.
16