(Bloomberg) -- The former chief executive officer of a defunct investment bank became the first top boss to be sent to jail for his role in the sprawling Cum-Ex tax scandal that’s cost Germany billions of euros.

Ex-Maple Bank GmbH CEO Wolfgang Schuck, 69, was sentenced to four years and four months by the Frankfurt Regional Court, which also convicted three colleagues on Monday. Schuck was fined €96,000 euros and had 2.9 million euros in assets seized. 

“You were in charge, it hinged on your decision whether the trading strategy was implemented,” Presiding Judge Werner Groeschel told Schuck when delivering the verdict. “We are convinced that the Cum-Ex deals wouldn’t have happened had you put down your veto.”

A 58-year-old American was sentenced to four years and two months in prison and ordered to give up assets of €1.1 million, while a 51-year-old trader was handed a term of three and a half years and must forfeit €805,000 in assets. A 62-year-old banker who cooperated with prosecutors was given a two-year suspended term and must give up assets of €5.7 million. Under German media law, the men can’t be fully identified.

More Than 1,600 Suspects

Cum-Ex, a trading strategy set up to gain refunds on taxes that were never paid, siphoned off massive amounts of government revenue over several years. Named for the Latin term for “with-without,” Cum-Ex took advantage of German tax laws that seemed to allow multiple investors to claim refunds of a tax that was paid only once. The nation abolished the practice in 2012. Shortly after authorities started to probe. They are now looking at more than 1,600 suspects form across the financial industry.

Read More: The ‘Cum-Ex’ Tax Dodge That Is Haunting Global Banks: QuickTake

While the tax losses alleged in Monday’s case amounted to about €388.6 million, the total cost to taxpayers of all Cum-Ex schemes targeting Germany is estimated to be more than €10 billion.

The Maple bankers’ trial has been pending since May of last year. The men had dubbed the strategy they ran from 2006 to 2009 the “German Pair.” Initially, they organized the trades within the bank’s group. Starting in 2008, they added other financial players on the short-seller side, including Barclays Plc, Bank of America Corp.’s Merrill Lynch and Fortis Bank Nederland NV. These banks and Maple prearranged the trades to obtain the illegitimate tax refunds, according to the court.

‘Universal’ Principle

Judge Groeschel said that when in 2006 Maple first considered starting Cum-Ex transactions it was clear everyone understood that the profits came from tax refunds based on shares that “didn’t really exist,” as one banker put it. A manager wrote up an email discussing the doubts about the strategy, so its problematic nature was clear from the start, the judge said.    

That’s also why the men couldn’t defend themselves by citing legal clearance they received from law firm Freshfields on the deals, said Groeschel. He also rejected claims that lawmakers had blurred the line between what was legal and illegal. 

“One principle is universal: tax payers need to make truthful statements,” said Groeschel. “You don’t have to write that into the tax laws.”

Jail terms were necessary not only because of the huge tax loss but also the “considerable criminal energy” of the four, according to the court. Likewise, the court said it was important to reward with a suspended sentence the cooperation of the 62-year-old former head of trading at Maple. 

Leniency    

Those “who cooperate can expect leniency, but those who until the very end deny having known anything or who claim that all was legal” can’t, said Groeschel. “That’s the message that needs to come across.”

Alfred Dierlamm, the lawyer for 62-year-old, said the verdict was an important signal that cooperation was being honored. 

Schuck’s lawyer Barbara Livonius said she was happy the court followed the defense’s arguments on how much could be seized and that he got almost a year less than prosecutors had requested. They’d asked for five years and three months and wanted to seize assets worth €5.5 million from him.

Bjoern Krug, a lawyer for the American, said his client assumed responsibility and has aimed to undo the damage. While the ruling was “balanced,” the court only reluctantly took the role of the advising law firm and the failure of lawmakers into account, he said. 

Oliver Kipper, the trader’s defense attorney, declined to comment.

The Frankfurt bank was the German unit of Canadian bank Maple Financial Group Inc. German financial regulator Bafin in 2016 closed Maple as the lender couldn’t shoulder the tax bill levied by authorities, asking to pay back the money received over Cum-Ex. The Canadian parent company went into liquidation the same year.

The court is now expected to open a trial against two former Freshfields tax attorneys by the end of the year. The duo were originally charged together with the Maple bankers but their cases were later separated. The law firm’s role played a prominent part in the Maple bankers’ trial.      

(Updates with comment by lawyer for the American in last section.)

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