Charges dropped against former Deutsche Bank executives - source

FRANKFURT (Reuters) - Deutsche Bank's DBKGn.DE former co-chief executive and former chief financial officer have been cleared of charges of conspiring to evade taxes in the trading of carbon emission certificates, a source familiar with the matter told Reuters.

The source said the Frankfurt public prosecutor terminated investigations of Juergen Fitschen, who stepped down as co-CEO of German’s biggest bank in May, and of Stefan Krause, who recently joined buyout group Warburg Pincus.

The prosecutor and Deutsche Bank declined to comment.

Earlier this month, a former Deutsche Bank employee was sentenced to three years in jail for his part in a scheme trading carbon emission permits designed to curb global warming but used to fraudulently collect tens of millions of euros of sales tax.

Handing down suspended jail sentences to five other former Deutsche bankers also involved, Judge Martin Bach had criticised the bank, saying the “failure of all security mechanisms” had allowed the fraud.

The case stems from an investigation into so-called carousel trades in the European Union’s carbon market in 2009 and 2010, in which some buyers imported emissions permits into one EU country without paying value-added tax (VAT).

The buyers sold the permits designed to put a price on pollution to each other, adding VAT to the price and generating tax refunds when no tax had been paid.

Frankfurt prosecutors had investigated more than two dozen current or former employees at Deutsche Bank, including Fitschen and Krause.

European police agency Europol has estimated the cost to taxpayers at more than 5 billion euros (4 billion pounds) since 2008.

Sueddeutsche Zeitung earlier reported the end of the investigations into Fitschen and Krause.

Reporting by Andreas Kröner; writing by Arno Schuetze; editing by Andreas Framke and Jane Merriman