Frankfurt prosecutors confirmed that they have charged six people — including three former London-based investment bankers — for allegedly getting improper refunds on dividend tax.

The charges cover 61 short sales of shares of companies listed on the German benchmark DAX that took place between 2006 and 2008. The trades were valued at 15.8 billion euros ($18.7 billion), costing tax authorities 106 million euros, the Frankfurt General Prosecutor’s Office said Tuesday in an emailed statement that didn’t identify the suspects.

The indictment targets a group of former bankers at UniCredit SpA’s HVB unit who were behind the alleged scheme, according to a copy of the charges viewed by Bloomberg News. The lawyer is Hanno Berger, who was Germany’s most profitable tax attorney before being embroiled in the probe. Prosecutors see him as the brains behind the tax strategy they say crossed a line to tax evasion.

Banker Paul Mora, a New Zealand native, worked with two London-based co-workers to set up the trades at HVB’s investment bank unit. The trio, and two German former employees of HVB, were charged. All have left the bank.

First Indictment

Lawyers for Berger, Mora and three of the bankers didn’t immediately reply to emails seeking comments. Hellen Schilling, a lawyer for the fifth banker, declined to comment. Berger has denied the allegation in several interviews with the German press, saying the strategy was legal, citing a 1999 ruling of Germany’s top tax court on taxation of dividend payments in short sales.

The indictment, which was filed in September and has been previously reported in the German media, is the first to be filed in probes looking into so-called cum-ex trades. Prosecutors in Frankfurt, Munich and Cologne are looking at hundreds of suspects from the financial industry over the issue.

The announcement was delayed to ensure the men knew of the charges before they were disclosed. Three of the six suspects aren’t native German speakers, and the court required that almost 1,000 pages be translated for them before the charges were released.

Many German banks were involved in cum-ex transactions in various roles, and may face a hit of 1.9 billion euros from their actions, according to figures released by country’s financial-market regulator in February. The amount reflected the exposure of 24 German banks involved in the transactions calculated by regulator BaFin based on figures provided by the lenders. Many international banks were also involved at some point of the deals.

HVB spokeswoman Marion Nagl declined to comment. HVB repaid the tax damage caused by the scheme, prosecutors said in the statement. Shortly after tax authorities started to question the practice, HVB began its own internal review.

Settlement

Berger and the former HVB team are being targeted by all three German prosecutors’ offices but the bank was able to settle with Cologne, Munich and Frankfurt prosecutors. The lender is now suing some of its former managers to make them pick up some of the tab.

Cum-ex transactions relied on language in German tax laws that seemed to allow both short-sellers and the actual holders of shares to claim tax credits on a dividend that was only paid once. The strategy made use of tax certificates issued by banks involved as custodians of the buyers. While Germany eliminated the rules in 2012, there has been debate as to their legality before that time.

In March 2017, Germany’s top court backed 2012 raids by prosecutors in the current case, saying the searches were compatible with the country’s constitution and upholding a lower tribunal’s finding that there was “a suspicion of especially grave tax evasion.” Berger was trying to have the judges stop prosecutors from using documents seized during raids.

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