Prosecutors Expand Carbon Trading Probe.

[ by Larry Goldfarb ]

Deutsche Bank's Frankfurt headquarters were raided on Wednesday, signalling an expansion of an investigation by prosecutors into severe tax evasion, money laundering and obstruction of justice - all involving the trading of carbon permits.

First, Co-CEO Juergen Fitschen and CFO Stefan Krause were noted as subjects of a tax probe involving the sale of carbon-emission certificates that led to 5 arrests and police raids on the lender’s Frankfurt offices.  Fitschen and Krause’s approval of value-added tax statements for 2009 is being reviewed by prosecutors - according to an emailed statement by the Bank.  Any errors in the document were corrected in a timely manner, the bank said. Prosecutors say the correction was too late, the lender said.

Next,  Frankfurt public prosecutors said they were investigating suspicions of severe tax evasion, money laundering and obstruction of justice against 25 bank staff and had arrested five of them.  In a precursor to the arrests, Deutsche, in October, suspended a handful of employees after it was criticized by a judge last year during a trial into tax evasion on carbon permits.  The way Deutsche Bank conducted emissions trading with some of the convicted men had left the door open for tax evasion, the judge said at the time.

Deutsche Bank on Wednesday said it was cooperating fully with the authorities and declined comment on the arrests. The European Union's spot carbon market was hit by so-called carousel trade in 2009 and 2010, in which buyers imported emissions permits in one EU country without paying value-added tax (VAT) and then sold them to each other, adding tax to the price and pocketing the difference. To stop the problem of VAT fraud in the EU's emissions trading scheme, the European Commission in June activated a new common carbon registry to replace some 30 national registries with a single platform.  Investigations are continuing in other EU countries.  The EU Emissions Trading System, the bloc's chief weapon against climate change, caps the emissions of factories and power plants, forcing them to buy carbon permits for additional emissions if needed while also allowing them to sell surpluses.

For more information, please read [Reuters, 12/12/12]