German prosecutors searched Morgan Stanleyit is
offices in Frankfurt on Tuesday as part of a years-long tax evasion investigation that has implicated several financial firms across Europe.
In addition to the bank, the authorities searched the homes of two suspects in the case, the Cologne prosecutor’s office said. It aimed to collect emails and written correspondence, he added.
“The investigation relates to historic activity and we continue to cooperate with German authorities,” a Morgan Stanley spokeswoman said.
The survey focuses on historical cum/ex trades, which are trades executed for a few days before and after the companies’ scheduled dividend payment dates.
Cumulative/ex transactions typically involve banks, brokerage firms, hedge funds, and high net worth individuals entering into agreements to buy, borrow, and sell stocks for a brief period of time around a dividend payment. The carefully coordinated timing of transactions has resulted in many parties claiming a refund of taxes paid on dividends.
German officials say tax credits were artificially claimed through these types of transactions in a way that could constitute fraud. The German government took steps to prevent such transactions in the country and closed the tax loophole in 2012.
German authorities raid Bank of America Corp.
and Barclays PLC in March as part of the same investigation.
“The prosecutor’s investigation relates to historic activity dating back to 2006. We are working with authorities to assist in their investigations,” a Bank of America spokesperson said. A Barclays spokesperson said the bank was cooperating with authorities.
Cologne prosecutors are investigating some 1,500 suspects in 110 cases, he said in an email response. Several defendants have already been sentenced to prison terms by a court in Bonn, he added.
Probes have also been launched by other countries, including Denmark and Austria. That of Germany, which involves prosecutors in Cologne, Munich and Frankfurt, has been going on for years. In many cases, the bankers concerned no longer work in the banks.
Some banks have settled cum/ex issues with the authorities. Hypovereinsbank, UniCredit SpA.
in Germany, paid a total of 19.8 million euros, or about $20.9 million, in fines in settlements between 2015 and 2017.
Shares of Morgan Stanley rose 1.5% in early trading on Tuesday.
Write to Patricia Kowsmann at [email protected]
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Appeared in the May 4, 2022 print edition as “Morgan Stanley’s Offices in Frankfurt Searched in Tax Probe”.