Execs at London-Based Fund Charged by Prosecutors in Germany Amid Tax Probe

Karin Matussek and Donal Griffin, Bloomberg News

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(Bloomberg) -- Executives linked to Duet Group, a London asset manager, were the people recently charged in Germany as part of the country’s sprawling Cum-ex investigation.

Cologne prosecutors indicted Henry Gabay, Duet Group’s chief executive officer and founder as well as Alain Schibl, one of the firm’s founders, according to people with knowledge of the process. The names weren’t disclosed when German prosecutors filed charges in September.

Osman Semerci, a former executive who joined Duet after leaving Merrill Lynch & Co., was also charged, the people said who asked not to be identified because prosecutors haven’t released the details. A fourth, more junior employee, was also charged.

Prosecutors in Cologne are probing about 1,500 people. Prior to the latest round, they had charged half a dozen people mostly at M.M. Warburg, winning four convictions. Germany’s top court last year backed the clampdown. Cologne is also increasing the pressure on international banks. They raided Barclays Plc’s Frankfurt offices in March days after Bank of America Corp.’s Merrill Lynch premises were hit. Morgan Stanley’s offices were searched in May and JPMorgan Chase & Co. in August.

Lawyers for Schibl, Gabay and Semerci all declined to comment. The three men didn’t respond to several requests for comment sent to them directly.

Cum-Ex was a trading strategy that siphoned off at least 10 billion euros ($9.7 billion) in government revenue. Named for the Latin term for “With-Without,” the deals took advantage of German tax laws that seemed to allow multiple investors to claim refunds of a tax on dividends that was paid only once. The nation moved to abolish the practice in 2012.

A spokesman for Cologne prosecutors said requests for comment on any Cum-Ex charges filed must be directed to the Bonn court. A spokeswoman for the Bonn court confirmed a new indictment was filed but declined to provide more details.

The Duet probe made headlines in the summer of 2020 when Gabay was arrested in the south of France at the request of Cologne prosecutors. He was then sent to Germany and released by a court shortly after his arrival. Duet, a multi strategy firm that invested in everything from real estate to commodities to frontier stocks, began engaging in Cum-Ex transactions around 2008, Bloomberg has previously reported.

Prosecutors in Cologne have been aided in their Duet probe by a onetime star trader at the fund, Bloomberg reported last year. He left the firm in 2015 and then became one of the first finance executives to cooperate with authorities as part of their sprawling investigation.

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