HypoVereinsbank Case

A Question of Accountability

theodor weimer and rolf friedhofen march 2010 annual press conference hvb in munich source dpa
In 2010, HypoVereinsbank CEO Theodor Weimer and his CFO, Rolf Friedhofen, were part of the same management team at the Munich headquarters of Italy's UniCredit bank. Now, HypoVereinsbank is considering trying to recoup up to €140 million from its former CFO for a series of dividend-stripping deals that cost the bank millions in bank taxes and penalties.
  • Why it matters

    Why it matters

    HypoVereinsbank’s attempt to recoup millions from three former top managers could serve as a test case in Germany for determining personal liability for those overseeing illegal banking activity.

  • Facts

    Facts

    • The three former bank managers are under scrutiny for condoning the widespread use of dividend-stripping, which generated millions in tax refunds for the bank and its wealthy clients.
    • HypoVereinsbank is negotiating with former chief financial officer Rolf Friedhofen and two other executives over a return of some of their compensation.
    • The bank has so far had to pay the German government about €140 million in back taxes, plus a €9.8 million fine.
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    Audio

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In what could become a test case for defining the limits of personal liability in corporate Germany, a Munich bank, HypoVereinsbank, may move to recover nearly €140 million ($151 million) from three ex-managers for their role in what was later deemed to be an illegal tax-refund investment scheme.

The strategy used at HypoVereinsbank, a unit of Italy’s UniCredit bank, was profitable, and not unusual at the time in Germany. Scores of other banks employed similar dividend-stripping investments over a decade to generate tax rebates and high returns for their clients and themselves.

But the investment’s underlying structure was later ruled to be illegal by the German government. Since then, the state has been pursuing the banks to recoup billions in lost revenue. HVB has had to return €140 million so far and pay an additional €9.8 million fine.

Now, HVB is taking the next step. It is considering recouping money from its former senior executives who were responsible at the time for the dividend-stripping. The three – a former chief financial officer, a former head of investment banking and head of private banking – could face repayment demands in the triple-digit millions of euros.

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