German court finds six guilty in carbon fraud trial

* Guilty verdict in six cases, jail sentences for six men

* Men took part in VAT fraud in EU carbon market

* Deutsche Bank says uncovered no wrongdoing by its staff

FRANKFURT, Dec 21 (Reuters) - A German court on Wednesday sentenced six men to jail terms of between three years and seven years and 10 months in a trial involving evasion of taxes on carbon permits.

Judge Martin Bach said the men, aged between 27 and 66, were guilty of having participated in a conspiracy to evade around 300 million euros ($393 million) in value-added tax (VAT) between August 2009 and April 2010.

In 2009 and 2010, the European Union’s spot carbon market was hit by so-called carousel trade 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.

“The convicted were fraudulently involved in tax-evading trades...they have brought the carbon market trading scheme into disrepute,” the judge said.

The EU Emissions Trading System, the bloc’s chief weapon against climate change, caps the emisssions of factories and power plants, forcing them to buy carbon permits if needed while also allowing them to sell surpluses.

The way Germany’s flagship lender, Deutsche Bank, conducted emissions trading with some of those that have been convicted had left the door open for tax evasion, he added.

Deutsche Bank said on Wednesday that independent legal experts had so far found no wrongdoing on the part of the bank’s employees. Bank staff have testified in the trial and some continue to be investigated, but none have been charged.

The Frankfurt district court verdict marks the first convictions after an EU-wide investigation into the fraud, in which Germany carried out the biggest swoop on suspects and investigated 150 suspects and 50 companies in coordination with other EU nations.

European police agency Europol estimates widespread VAT fraud cost EU member sates an estimated 5 billion euros in lost tax revenue.

The judge said Germany was the target of fraudsters in the second half 2009 and first half 2010 after France, the Netherlands and Britain closed legal loopholes.

Germany followed suit only from July 1, 2010 onwards.

Irfan Musa P. from Britain received the maximum sentence of 7 years and 10 months; German Bjoern P. 6 years; his father Robert P. 4 years; Wayne Stewart B. from Britain 4 years; Fraz M. from Britain 4 years and French man Claude B. 3 years.

Robert P., Claude B. and Fraz M. were released for having served parts of their sentences and because there were personal circumstances ruling out the risk of their flight before the next terms of their detention.

The court did not release surnames according to German practice.

A separate trial in Britain is set to start next February, after seven suspects charged with carousel fraud pleaded not guilty in October.

The EU scheme has suffered a series of scandals since its launch in 2005, including permit theft, the recycling of carbon credits, and hacking of carbon accounts. ($1 = 0.7628 euros) (Reporting by Vera Eckert and Kathrin Jones, editing by Nina Chestney and Anthony Barker)