April 30, 2010 / 5:30 PM / 10 years ago

Germany, UK arrests 25 in suspected CO2 tax probe

FRANKFURT/LONDON (Reuters) - Germany and Britain have arrested 25 people and are investigating others in connection with suspected tax evasion in carbon permit trading, their respective tax authorities said on Friday.

Britain’s HM Revenue and Customs (HMRC) told Reuters it had arrested 8 people in Scotland and 13 more in the rest of the UK after a search of 81 businesses and residential premises.

Frankfurt prosecutors made three arrests in Germany and one under a European arrest warrant in Britain, where 50 more individuals were under investigation, said a spokesman for the Frankfurt prosecutors office, which has spearheaded the investigation.

The fraud occurs when companies buy carbon permits in one country without paying value-added tax (VAT) and sell them in another adding tax to the price but pocketing the difference for themselves.

“There have been raids and other measures in Britain, Denmark, Belgium, Finland, the Netherlands, Norway, Portugal, the Czech Republic and Cyprus,” the spokesman said.

The German investigation was also looking into allegations of money laundering, he added.

Both Germany and the UK declined to name individuals under investigation. Deutsche Bank (DBKGn.DE) said seven of its employees were suspects in the German investigation.

“Deutsche Bank believes the allegations raised against its employees can be rebutted,” a Deutsche Bank spokesman said.

The probe in Germany, where total damage is estimated at 180 million euros (156. 5 million pounds), follows investigations in Britain, France, Spain, Norway and the Netherlands into carbon credit fraud over the last year. Last August, HMRC arrested and subsequently bailed nine people.

BUSINESS TIES

RWE’s trading unit (RWEG.DE) said on Wednesday that although it was not under suspicion, it had had business ties with one of the suspects and was cooperating with the authorities.

Italian bank UniCredit SpA said the investigation was not directed against the bank, but some of its customers had been affected.

Utilities EnBW (EBKG.DE) and Vattenfall Europe VATN.UL said they were not affected by the tax office raids. Frankfurt-based Noble Group, one of the world’s largest carbon credit aggregators, said it was unaffected by the probe.

German energy industry executives expressed concern that other energy markets or other European nations’ carbon sectors could also be targeted.

Wider-reaching EU regulations for carbon were agreed in March but member states need to implement them by passing national laws now, which in Germany’s case will only apply from July 1.

European police agency Europol last December put the amount of damage from fraudulent EU carbon credit trading at more than 5 billion euros in the previous 18 months.

(Additional reporting by Michael Szabo and Jonathan Gould)

Editing by William Hardy

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