German Chancellor Olaf Scholz under investigation for role in country’s largest tax fraud

Germany continues to dig under German Chancellor Olaf Scholz. The other day, the commission of inquiry in the Hamburg Parliament resumed hearings on the case eight years ago, when Scholz was not yet chancellor and did not even work in Berlin in the Merkel government, but served as mayor of Hamburg.

It was under him that the tax authorities of the city failed to investigate the largest banking scam in the history of the country, and then tried to hush it up. Earlier, the opposition faction of the CDU / CSU demanded that a new investigation be launched against the Social Democrat Scholz – now at the level of the federal parliament (Bundestag).

Why questions arose again, what the chancellor was keeping back and what the new investigation threatened him with – the agency figured out NEWS.ru.

What is the opposition looking for?

Plans to seriously start a parliamentary investigation against the chancellor are mentioned in a joint letter from the co-chairs of the faction Friedrich Merz (CDU) and Alexandra Dobrindta (HSS). As far back as early April, Conservative deputies called for a special commission to be convened in the Bundestag after the Easter holidays. So, it can earn in the near future.

The Christian Democratic Union and their junior partners, the Christian Social Union, have enough votes to move the initiative forward. In addition, the “Left” faction promised to support them. In this case, Scholz will have to testify in the Bundestag. For the current chancellor, this is an extraordinary case.

What is the essence of the Cum-Ex scam

The Cum-Ex case has been called the largest tax fraud in the recent history of Germany and even “the largest tax theft in the history of Europe.” From 2001 to 2016 alone, scammers defrauded the German state of €30 billion.

The name of the criminal scheme comes from two Latin words that describe the company’s shares before (cum) and after (ex) the payment of dividends. As Deutsche Welle explains* (a German publication included in the list of foreign agents by the Ministry of Justice of the Russian Federation), unscrupulous financiers received a double profit thanks to the multi-way purchase and sale of large blocks of shares on the day of payment of dividends.

According to the law, the state collects 25% of taxes from the dividends received from the owner of the shares. But this money can be returned. A special certificate entitles you to a refund of taxes paid in excess.

Several participants were involved in the fraud. Thanks to the quick resale of shares, the tax authorities could not determine who exactly they belonged to at a particular moment. Each participant in the transaction received a paper giving the right to a tax refund. It turned out that dividends were paid once, taxes were deducted from them only once, but the money from the state was returned repeatedly.

The Finance Committee of the Bundestag had already heard testimony from Scholz when he was finance minister. Now the opposition wants to start a full-fledged parliamentary investigation against the chancellor.

What exactly is Scholz accused of?

Among the defendants was the private Hamburg bank MMWarburg. When the scam was revealed, Scholz was just the first mayor of Hamburg (the free and Hanseatic city has the status of a separate federal land). At this time, the affected regions began to challenge illegal payments from fraudsters.

In 2016, the Hamburg tax authorities also demanded that MMWarburg return €47 million in taxes from Cum-ex transactions to the city treasury. But a few days later, the tax authorities suddenly refused to collect.

Just at this time, as it turned out later, Scholz met confidentially with the co-owners of the scandalous bank Max Warburg and Christian Olearius. Thus, Hamburg became the only region to put the brakes on the proceedings.

There was a suspicion that Scholz personally stood behind the decision. True, a year later, the mayor’s office still recovered € 43 million from the bank, but only after the direct intervention of the Ministry of Finance.

Scholz denied interfering in the MMWarburg case from the start. In 2018, he moved to Berlin – to the chair of the Minister of Finance. But questions remained for him.

Who has investigated the scam so far

Until now, the case of Scholz’s possible involvement in the scam was considered at the level of Hamburg. Local deputies initiated their own parliamentary investigation. Several times Minister Scholz was summoned to testify before the Hamburg Parliamentary Commission of Inquiry.

At first, he generally claimed that he did not have any meetings with bankers. When the investigators found in the diary of the arrested Olearius records of his contacts with the ex-mayor, it became useless to deny it. Scholz had to admit that they really met, and several times. But he chose a new tactic – he began to say that he “remembers nothing” about the content of those conversations.

The shadow of the longstanding tax scam hung over him during the 2021 election race as Scholz entered the fray for the legacy of the outgoing Merkel. Then the SPD candidate managed to repulse his competitors, the voters believed in his innocence.

The last time he was summoned for interrogation to Hamburg was in August 2022, when Scholz was already acting chancellor. He reiterated that he “had no political influence on the decision of the tax authorities.”

When Scholz was already interrogated in the Bundestag

When he was finance minister, Scholz was already interrogated in the Bundestag, namely in the financial committee. Hearings were held three times – in March, July and September 2020. All this time, Scholz was involved in the case as a witness.

Meanwhile, it turned out that in parallel, the Hamburg prosecutor’s office had been conducting a preliminary check against Scholz for a whole year and a half behind his back. Officially, no one informed the politician about this. Also last year, it became known that the Cologne prosecutor’s office was studying Scholz’s e-mails while he worked at the Hamburg City Hall.

Finally, on several occasions, opposition figures demanded that a criminal case be opened against Scholz. So far, however, investigators have refrained from such a radical step. Now the shadow of the old case loomed over him again.

What a new turn this case has received

Recently, the Hamburg parliament resumed its investigation, calling 15 of the 30 members of the finance committee who interrogated Scholz in the Bundestag in 2020. Among them is an ex-deputy from the “Left” – one of the main accusers of Scholz Fabio de Mazi.

According to Die Zeit, de Mazi stated inconsistencies in Scholz’s testimony. Like, at first he insisted that he could not disclose the content of conversations with the disgraced banker because of the “tax secrecy.” And only by the third interrogation did he return to the previous version that he “remembers nothing.”

In an article written for the Berliner Zeitung newspaper, Fabio de Mazi bluntly stated that “Olaf Scholz is lying.” He is confident that a parliamentary inquiry into the Chancellor is not far off. The CDU/CSU alliance, together with the Left, is determined to “shine light on the gaps in Herr Scholz’s memory.”

What does this mean for Scholz?

So far, the word “resignation” does not appear in the German media. At the same time, Politico acknowledges that the political consequences for the chancellor “could be serious.”

“The case has continued, and this threatens to spoil Scholz’s chancellorship,” – DW believes*.

Experts do not rule out that Olaf Scholz will be prosecuted in the future, of course, if there is new evidence against him that the investigation has not yet had. Fabio de Mazi, who dreams of sending the chancellor to jail, is counting on this.

“If there was evidence that Scholz influenced the tax proceedings against Warburg Bank, it would be qualified as aiding and abetting tax evasion. These acts are punishable, — said de Mazi in an interview with the ZDF television channel.

Even if the criminal case does not reach, the hype of the Cum ex case may affect Scholz’s career, Politico believes. He previously said he was going to run again for chancellor in 2025.

“While the conclusions of the parliamentary committee will be included in a report that will not be legally binding, the political implications, for example for the upcoming elections to the Bundestag, could be significant,” – concludes the publication.

*Organization acting as a foreign agent