You know that late-stage capitalism is upon us when a financial scandal targeting €60 billion in fraud against public treasuries is lost in the noise of other scandals.
The scandal is called "cum/ex" ("with/without"), and it used a blunt tactic to defraud tax authorities by allowing multiple parties to claim to own the same shares in order to apply for tax credits. The accused — "cowboy traders, seasoned tax lawyers and mathematical whizz kids" — based in London's ground zero for financial crime, the City, are said to have already stolen €447m when they were caught.
While the press accounts have been at pains to contextualize the breathtaking scale of the fraud ("Robbery of the century" – Le Monde; "Organised crime in pinstripe suits" -Follow the Money), those accounts have been sparse, drowned in the noise of a thousand other scandals.
Moreover, the scandal implicates many of Europe's largest banks (of course). As the trial begins, the primary defense the accused are mounting is that they were engaged in tax "optimization" and that it was all perfectly legal.
As John Quiggin writes, "crooked deals of this scale suffice for a complete explanation of the growth of the global financial sector since the 1970s. The point of the financial sector is not to allocate capital more efficiently, but to undermine the regulatory and tax systems that are supposed to make the economy work properly. Unsurprisingly the huge financial boom has been accompanied by miserable productivity growth, repeated business collapses and massive growth in inequality."
Wearing a navy blue suit and an Apple Watch with a white strap, Shields on Wednesday used a Powerpoint presentation to talk the court through the “cum-ex ecosystem” of labyrinthine trade chains he helped conceive and control, which prosecutors say cost the German state €450m. A translator tasked with rendering City trader jargon into German legalese was struggling to keep up.
The financial rewards were breathtaking: for the five years in which Shields practised cum-ex trades through Gibraltar-based investment vehicle Ballance Capital, his personal income amounted to €12m. In 2010 Shields and his wife managed to purchase a £9.7m mansion on Chelsea’s Egerton Crescent, followed by a €6m Edwardian terrace on Shrewsbury Road, Dublin’s most expensive residential street.
While Shields did not respond directly to the charges of serious tax fraud this week, he said in hindsight he had started to feel regret about devising the schemes, which hoovered up money that could have otherwise been spent on building roads, hospitals or nurseries.
'The men who plundered Europe': bankers on trial for defrauding €447m [Philip Oltermann/The Guardian]
(Image: Adam Smith, CC BY-SA)
