(Bloomberg) -- Christian Olearius, the former head of M.M. Warburg & Co. on trial for allegedly approving Cum-Ex tax deals costing Germany €280 million ($300 million), denied the charges against him, claiming he hadn’t known that short sales were used in the controversial trades. 

Klaus Landry, one of his four attorneys, told the Bonn court hearing Olearius’s case that it was “absurd” that prosecutors depicted him as part of a gang that robbed money from the government. The firm is Olearius’s life’s work and it’s inconceivable that he’d do anything to jeopardize that at the end of a successful career, Landry said according to a manuscript of his statement.     

“He never did claim, and he never would have claimed, refunds of tax that wasn’t paid before,” Landry said. “He has always stressed that he knew nothing of short sales and that he assumed that this was dividend stripping,” a form of tax avoidance that didn’t entail double refunds.  

Olearius, 81, is accused of 14 counts of aggravated tax evasion between 2006 and 2019. He knew all the details and “was personally involved,” prosecutors had told the judges on Monday. Short selling, where traders sell shares they don’t own, was a key element of Cum-Ex, allowing investors to get multiple refunds of a dividend tax that was paid only once. 

The Hamburg-based lender’s Cum-Ex deals have been at the center of Germany’s first trial in Bonn over the controversial trading strategy, leading to the convictions of two former UK traders. Germany’s top criminal court backed that verdict in a landmark ruling. 

Landry said these judgments contort the presumption of innocence into a presumption of guilt for his client, as they already judged his action as criminal. The authorities probing him leaked his diaries and other material to the media, branding him as guilty before the trial even started, he added.   

The German state of North-Rhine Westphalia, whose agents are prosecuting his client, committed the same crime they now allege, said Peter Gauweiler, another of Olearius’s lawyers. He cited Cum-Ex trades by WestLB, the state’s former bank, which generated tax refunds of €1.2 billion.

Just like Warburg, WestLB did the trades with ICAP and Deutsche Bank AG. WestLB’s successor, Portigon AG, has meanwhile sued ICAP in a U.S. court, claiming it was deceived about the fact that short sales were used. Gauweiler told the judges that this backs up his client’s claims.  

The attorney also complained that the probe took way to long — seven years — and that charges could have been brought four years ago. The years of uncertainty were a heavy burden, the lawyer told the court.

“Also because of the public-relations work by the prosecutors’ office, he had to face being treated like an already-convicted criminal,” said Gauweiler. “Not only in public and via-a-vis authorities, but also via-a-vis the sensitive clients of a private bank.” 

The case is: LG Bonn, 63 KLs 1/22.

(Updates with second defense lawyer in ninth paragraph.)

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