Tax Scandal: Cum-Ex Witness Avoids Prison Time with Suspended Sentence

Kai-Uwe Steck, a key figure in Germany's largest tax scandal, the Cum-Ex affair, has been sentenced but will not serve time in prison. Since November 2024, Steck had been facing charges of aggravated tax evasion in eight separate cases, which resulted in a total damage of EUR428 million. Some allegations were separated during the trial as they were deemed to be at the attempt stage and may be addressed in future proceedings.

The prosecution sought a prison sentence of three years and eight months, along with the confiscation of EUR25 million in illicit gains. However, the court's ruling fell significantly short of these demands, much to the relief of Steck's defense team, which argued for the case to be dismissed entirely. They claimed that Steck had made substantial contributions to the investigation into the scandal and had not received a fair trial.

Steck, who remained calm during the verdict announcement in Siegburg, had previously admitted to his involvement in the scandal. His case is notable as it marks a significant moment in the ongoing efforts to address the far-reaching consequences of the Cum-Ex transactions, which involved stock traders, banks, and lawyers orchestrating complex deals to exploit tax loopholes. These practices continued until they were curtailed by legislation in 2012, and were declared illegal by the Federal Court in 2021.

The scandal has cost the German state more than EUR10 billion, and authorities are actively working to recover as much of this amount as possible. Currently, over 1,000 individuals are facing charges related to various aspects of the Cum-Ex dealings across Germany. High-profile defendants include former law firm partner Hanno Berger, who received an eight-year prison sentence, and Christian Olearius, a co-owner of Warburg Bank, whose case was terminated for health reasons.

Steck's relatively lenient sentence is largely attributed to his role as a cooperating witness for the prosecution. He was among the first to turn himself in to authorities in 2016, providing extensive testimony about the dealings in 21 interviews with investigators from the Cologne Public Prosecutor's Office and the North Rhine-Westphalia State Criminal Police. His cooperation has been acknowledged as a significant factor in advancing the investigations against his former colleagues.

Despite the court recognizing his contributions, there were criticisms regarding his failure to fully repay the embezzled tax funds. Steck claimed to have earned approximately EUR50 million from the Cum-Ex operations, with plans to return the money. However, only EUR11 million of a promised EUR13.6 million has reportedly been transferred to the state treasury following a previous verdict against Berger. Steck has also contested a confiscation order from the Wiesbaden District Court, with a ruling expected in July.

Furthermore, claims that he had established a trust account containing EUR50 million for restitution purposes were found to be misleading, as investigations revealed that the account primarily held speculative stocks from companies that had already gone bankrupt by the end of 2023. Steck admitted in court that the majority of the funds were no longer available, stating that he was at the limits of his capabilities.