Macquarie financed German cum-ex trades its own lawyers called corrupt

In 2010, Macquarie's European funds business spent months designing a plan to lend €3.3 billion to hedge funds running German 'cum-ex' trades — short-selling around dividend dates so multiple parties could claim the same withholding-tax credit. A board memo put the base case at a 304.7% net return on economic capital, and CEO Nicholas Moore's office was briefed on 'dividend arbitrage opportunities' by September. The board signed off in late October, subject to an independent political-risk assessment.

The red flags were inside the bank's own correspondence. Its main law firm, Freshfields, warned the December 2010 German tax changes used the word 'corrupt' and that continuing meant 'massive reputational issues'; a Macquarie tax adviser emailed a hedge fund adviser: 'Big problem. Game Over.' Division head Stephen Lucas wrote he had been told 'every other bank doing this has decided to pull out and we are last man standing'. The Munich office head waved concerns off as 'differing views about economic ownership'.

Macquarie's answer was to restructure rather than retreat: it dropped the German funds and instead lent Irish hedge funds to run the same strategy — the April 2011 deals now at the centre of the Cologne Prosecutor's Office investigation into 'assistance for tax fraud'. A civil suit alleges the plan stood to extract €462 million in unjustified tax benefits. The bank says it was one of more than 100 institutions in the market and believed it was acting lawfully; architect Hanno Berger, charged in May 2018, told Handelsblatt 'everything Macquarie did was legal'.

Alleged €462M in unjustified tax benefits across the plan; 30 current and former Macquarie staff, including two CEOs, are persons of interest in a criminal probe.

The profit model was double-crediting one share's tax credit — value extracted from the German taxpayer, with no economic purpose.

The bank's primary law firm withdrew advice and flagged reputational risk before the deal was restructured, not after.

Internal email showed every competitor had pulled out, and the response was to change the structure instead of dropping the strategy.

Approvals ran on return-on-capital maths while the political and legal risk assessment was treated as a box to check.

When your own counsel says the word 'corrupt' and peers pull out, the profit case is the risk case — 'last man standing' is a warning, not an opening.

By September 2018 the Cologne Prosecutor's Office had named around 30 current and former Macquarie staff — including Moore and his successor Shemara Wikramanayake — as likely interviewees, among suspects and persons of interest, and the scandal was estimated to have cost German taxpayers about €10 billion across the market. Germany banned the practice in 2012. Macquarie released an ASX statement answering some of Fairfax and Handelsblatt's questions and declined interviews.