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A former Freshfields Bruckhaus Deringer partner sentenced to three-and-a-half years in jail for aiding and abetting a multiyear dividend tax fraud received more than €2mn in severance pay when he agreed to leave the firm, people familiar with the matter told the Financial Times.
Ulf Johannemann, Freshfields’ former global head of tax, left the firm in late 2019 “by mutual consent” after he was arrested in connection with the case, the firm said at the time. The fact he received a severance package in excess of his annual salary of €1.9mn has not been previously reported.
Johannemann was convicted by a Frankfurt court last month for his role in the so-called cum-ex scandal. He endorsed share-swapping deals that were used to trick German tax authorities into refunding dividend tax that was never paid in the first place in a series of legal opinions issued between 2006 and 2009 for Maple Bank, a defunct German subsidiary of Canada’s Maple Financial.
The transactions exploited a flaw in the German tax code that was fixed in 2012, and which is estimated by a consumer protection lobby group to have cost the German taxpayer a total of €10bn.
The “magic circle” firm will not seek to claw back the severance pay, people familiar with the firm’s internal discussions told the FT, adding that Freshfields believed there was little if any chance of success in doing so.
The law firm agreed the severance package in late 2019 when Johannemann was being held in police custody because he was considered a flight risk. He was formally charged shortly after leaving the firm.
During a four-month trial, the court heard that he used the severance to partly pay his €4mn bail. Before his arrest, he transferred €2mn in cash and shares as well as 9kg of gold to his wife, the Frankfurt court was told.
People familiar with the law firm’s internal discussions argued that in 2019 Freshfields wanted to sever its ties to Johannemann quickly after it had become clear that he would be charged. The firm applied its standard procedures to calculate the size of the severance package, one of the people added, which partly reflected Johannemann’s financial stake in the partnership.
Johannemann told the court that he took “full responsibility” for his mistakes and had “glossed over the fact that my legal advice was used for illegal means”.
A panel of five judges ruled last month that it was “perfectly obvious” and “beyond doubt” that Johannemann’s legal advice had been fundamentally flawed as he was aware that the reclaimed tax was never paid, calling the underlying transactions “organised [financial] crime”.
Johannemann has not yet been jailed as the verdict is not legally binding until the parties have exhausted the appeals process.
The lawyer is still under criminal investigation by prosecutors in Cologne, who are probing similar legal opinions on “cum-ex” deals for other clients. Freshfields advised about 25 financial institutions on such deals, people familiar with the matter said.
The law firm has paid €60mn to avoid criminal prosecution and to settle damages linked to Johannemann’s work.
Freshfields and a lawyer for Johannemann declined to comment.
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