FRANKFURT (Reuters) - Six people accused of evading more than 200 million euros ($282 million) in tax in the European carbon market face possible prison terms of up to nine years, the judge told the opening of their trial at a Frankfurt district court on Monday.
The six men, aged 27 to 65, are accused of having conspired to evade value-added tax (VAT) from September 2009 to April 2010. The prosecutors said the accused took advantage of tax rules in Germany which were valid until June of last year.
Judge Martin Bach said the defendants could receive prison sentences of between three and nine years, with the duration in some instances potentially shortened through cooperation provided by defendants.
Defense lawyers criticized the judge, noting he had called the case “opaque” in preliminary meetings and prematurely talked about the scope of potential sentences while the defendants were still being interviewed about possible cooperation with authorities.
Claude Bauduin, Robert Peitzmeyer and his son Bjoern Peitzmeyer, Wayne Stewart Brown, Irfan Musa Patel and Fraz Mir — who are from Germany, France and Britain — were not asked to make a plea at this stage.
In an EU-wide investigation, Germany has carried out the biggest swoop on suspects, with prosecutors identifying around 170 suspects in carbon fraud.
A spokesman for the court said the cases of the six standing trial on Monday were seen as most pressing as they had been remanded in custody.
Seven employees of Deutsche Bank are among the 170, though the bank has said the firm itself is not subject to investigation.
“Deutsche Bank continues to assume that accusations by the prosecutors against its employees will turn out to be groundless,” a spokesman for the bank said on Monday.
The EU carbon market has suffered a series of damaging scandals since its launch in 2005, which apart from VAT fraud include a long-running glut of permits, theft and recycling of carbon credits.
The fraud being investigated involves buyers importing carbon permits in one EU country without paying VAT and selling them in another, adding tax to the price but pocketing the difference for themselves.
Carbon trading is a cap and trade system for CO2 emissions certificates. Transfers are recorded in national registries before being stored in the overall EU log, called CITL.
Carbon credit fraud is a variation on VAT carousel fraud which has also happened in other markets.
According to a court statement, the Frankfurt hearing is scheduled to run on Monday and Wednesday this week and then regularly until at least March 5, 2012.
In the UK, seven defendants have been charged over suspected VAT fraud in the carbon market. A plea and case management hearing is scheduled for October 31, a spokeswoman for HM Revenue and Customs told Reuters on Monday.
The UK trial was delayed in June due to mounting evidence, which the defense said had become unmanageable in the existing timeframe.
Editing by Nina Chestney, James Jukwey and Jason Neely