Deutsche Bank Raided in Tax-Fraud Probe

Police arrest five employees at bank’s Frankfurt headquarters.

Deutsche Bank AG’s Frankfurt headquarters were searched by police and five employees arrested as part of a tax-fraud probe linked to the sale of carbon-emission certificates.

Prosecutors are probing 25 bank employees, Guenter Wittig, a spokesman for the Frankfurt General Prosecutor, said in an e-mailed statement today. Five of the staff were arrested over obstruction of justice and money laundering allegations, he said. He didn’t identify any suspects.

“There’s suspicion the bank employees withheld evidence from the authorities and failed to report potential money laundering,” Wittig said. The bank was previously raided in 2010 as part of the case.

Global investment banks are the subject of probes in countries from Japan to Canada as regulators intensify their scrutiny of the industry. At Deutsche Bank, the CO2 probe adds to subpoenas and civil litigation stretching from alleged rigging of interbank lending rates to claims the bank misrepresented products it sold tied to U.S. mortgages.

“While crimes like this could happen at any company, the world’s banks are facing ever more litigation,” Christian Hamann, an analyst with Hamburger Sparkasse who recommends investors sell Deutsche Bank shares, said. “In hindsight one could always say that the bank’s control systems could have been better.”

The search is part of a probe against individuals, bank spokesman Armin Niedermeier said. “Deutsche Bank continues to fully cooperate with the authorities.”

Deutsche Bank has set aside cash reserves to pay for any financial damages associated with the London interbank offered rate legal probes, Deutsche Bank’s chief of compliance Stephan Leithner said Nov. 28 at a Libor hearing of the Finance Committee of the Bundestag. An internal investigation established misconduct by several individual employees, though no wrongdoing by current or former members of the board in the Libor case, he said, repeating a statement the bank had made in July.

Tax inspectors carrying computer equipment and files were seen entering elevators at the bank’s headquarters in downtown Frankfurt today. About 20 police vehicles, including two large buses, were parked outside. About 10 police cars were parked in front of Deutsche Bank’s premises hosting the trading floor on Grosse Gallusstrasse in the financial district.


Tax Evasion

Six men linked to small trading companies were convicted of tax evasion by a Frankfurt court a year ago in a case tied to the sale of carbon-emission certificates to Deutsche Bank. The lender, which bought the securities, should have known they were designed to illegally evade value-added tax, Presiding Judge Martin Bach said at the time.

Deutsche Bank rose 0.2 percent to 34.38 euros as of 3:05 p.m. in Frankfurt. The shares have gained 17 percent this year.

Raids were also conducted in Berlin and Dusseldorf, Wittig said. About 500 federal police and tax investigators were involved. The authorities also raided private homes, said Wittig.

The prosecutors said last year they’re investigating as many as 170 people, seven of whom work at Deutsche Bank. The scheme deprived the government of 300 million euros ($391 million) of income, the court said in a December 2011 ruling.

The case is part of the biggest crackdown on emissions-related tax crimes since Europe opened the cap-and-trade system in 2005. German authorities enlisted assistance from 10 countries in 2010 and froze 100 million euros in funds as part of the probe.


Bloomberg News


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