Carbon conspiracy
December 21, 2011
A German court has found six men guilty of having participated in a conspiracy to evade taxes on carbon permits in the European Union.
The men, aged between 27 and 66 and from Germany, Britain, and France, were found to have evaded around 300 million euros ($391 million) in value-added tax (VAT) between August 2009 and April 2010. Using a so-called carousel trade, buyers imported emissions permits in one EU country without paying VAT and then sold them to each other, adding tax and keeping the difference.
The EU Emissions Trading System caps the emissions of factories and power plants in an effort to fight climate change. Companies are forced to buy carbon permits if they need to emit more carbon than permitted. Companies are also allowed to sell permits if they need to emit less carbon than foreseen.
"The convicted were fraudulently involved in tax-evading trades. ... They have brought the carbon market trading scheme into disrepute," said Judge Martin Bach in the Frankfurt district court on Wednesday.
The men were sentenced to jail terms of between three years and seven years and 10 months.
First convictions
Bach said the way Germany's flagship lender, Deutsche Bank, conducted emissions trading with some of the convicted men left the door open for tax evasion.
In a statement on Wednesday, Deutsche Bank said independent legal experts had so far found no wrongdoing on the part of the bank's employees. Some bank staff are still under investigation, but none have been charged.
Wednesday's verdict marks the first convictions after an EU-wide investigation into the fraud, which European police agency Europol estimates has cost EU member states as much as 5 billon euros in lost tax revenue.
In Germany, 150 suspects and 50 companies were investigated in coordination with other EU countries.
A separate trial in Britain is due to start in February, after seven suspects charged with carousel fraud pleaded not guilty in October.
The EU carbon scheme has run into a series of problems since its introduction in 2005, including the hacking of carbon accounts, permit theft and the recycling of carbon credits.
Author: Martin Kuebler (AFP, Reuters)
Editor: Michael Lawton