Former Freshfields Partner Receives €2mn Severance Pay for Involvement in Multiyear Dividend Tax Fraud: Exclusive Report

Frankfurt, Germany – A former partner at international law firm Freshfields Bruckhaus Deringer has been sentenced to three-and-a-half years in jail for his involvement in a multiyear dividend tax fraud. The partner, Ulf Johannemann, reportedly received over €2 million in severance pay when he left the firm by mutual consent in late 2019, following his arrest in connection with the case.

The severance package, which exceeded Johannemann’s annual salary of €1.9 million, was previously undisclosed. Johannemann’s conviction came as a result of his endorsement of share-swapping deals that deceived German tax authorities into refunding dividend tax that had never been paid. These deals were carried out through legal opinions provided to Maple Bank, a now-defunct German subsidiary of Maple Financial.

The cum-ex scandal, as it came to be known, took advantage of a flaw in the German tax code that allowed for such fraudulent activities. The scheme, which operated between 2006 and 2009, is estimated to have cost German taxpayers a staggering €10 billion, according to a consumer protection lobby group. The Frankfurt court that handled Johannemann’s case ruled that his actions constituted organized financial crime.

Freshfields, a prestigious law firm commonly referred to as part of the “magic circle,” has confirmed that they will not pursue reclaiming the severance pay. Internal sources indicate that the firm does not see a high chance of success in doing so. It is worth noting that the severance agreement was reached while Johannemann was under police custody, as he was considered a flight risk. The funds were partially used to meet his €4 million bail.

During the four-month trial, Johannemann admitted to his mistakes and took full responsibility for his actions. The court, however, found his legal advice to be fundamentally flawed, as he was aware that the reclaimed tax had never been paid. The subsequent ruling by a panel of five judges clearly stated the criminal nature of the underlying transactions.

Johannemann is yet to be incarcerated, as the verdict is not legally binding until all appeals have been exhausted. Prosecutors in Cologne are currently investigating additional legal opinions provided by Johannemann in relation to similar “cum-ex” deals for other clients. Freshfields, which reportedly advised around 25 financial institutions on such transactions, has already paid €60 million to avoid criminal prosecution and settle damages associated with Johannemann’s work.

Neither Freshfields nor Johannemann’s lawyer have provided comment on the matter.