NRW wants to use savings banks for West LB’s cum-ex risks

The state-owned Portigon has sued Erste Abwicklungsanstalt. The two successor companies of the failed Düsseldorfer Landesbank are soon arguing in court about who has to pay their evaded taxes.

The headquarters of the former West LB in Düsseldorf

In North Rhine-Westphalia, the cum-ex risks of WestLB, which went under in 2012, have been blooming for a long time. Now, according to information from the FAZ, one of the Landesbank’s two successor companies has sued the other. The state of North Rhine-Westphalia is the sole owner of the plaintiff Portigon and part owner of Erste Abwicklungsanstalt. This adds another curiosity to the “WestLB and Cum-Ex” case.

WestLB, which belonged to the municipal savings banks in North Rhine-Westphalia and the state of North Rhine-Westphalia, was one of the main culprits in the “Cum-Ex” tax fraud, in which funds and banks shifted shares around the dividend cut-off date to have capital gains tax paid only once on dividends credited several times afterwards. The machinations of WestLB in particular have uncovered data on a tax CD that was acquired from a thief by the State of North Rhine-Westphalia under the then finance minister and today’s SPD co-chairman Norbert Walter-Borjans. First, the Düsseldorf public prosecutor’s office investigated, now the Cologne public prosecutor’s office is responsible. In focus: the legal successor of WestLB, Portigon AG.

Portigon already needed a capital injection from NRW

Portigon is completely owned by NRW, both directly and indirectly through the state-owned NRW bank. Portigon AG is confronted with “various amendments from the Düsseldorf tax office” “in connection with the dividend arbitrage business of the former WestLB”, as it announced in December. According to information from the FAZ, it is primarily about tax assessments for the years 2005 to 2008, after the period for the statute of limitations was extended from ten to 15 years in the 2020 Annual Tax Act in cases of “particularly serious tax evasion”. For 2020, Portigon expects a loss of 600 million euros instead of the previous 100 million euros. According to calculations by the FAZ, 70 percent of Portigon’s equity would have been wiped out. The silent contribution of the federal government’s bank rescue fund (“Soffin”) had already shrunk in 2019 from 2 billion to 0.42 billion euros. In March 2021, the state of North Rhine-Westphalia supported Portigon with 160 million euros of equity and did not rule out further capital injections. Portigon should therefore need more state money to be able to pay taxes.

Now the lawsuit against the EAA follows

Meanwhile, according to information from the FAZ, Portigon is trying to pass on part of the tax reclaims by filing a lawsuit against Erste Abwicklungsanstalt (EAA) before the Frankfurt Regional Court. The plaintiff and the defendant are both successor companies of WestLB. Portigon was founded to shoulder the pension burdens of the employees, the EAA is supposed to reduce the securities portfolio of the failed Landesbank. In contrast to Portigon AG, which it fully owns through direct and indirect holdings, the state of North Rhine-Westphalia only holds 48 percent of the EAA. A good 50 percent belong to the two North Rhine-Westphalian associations of the savings banks, and the two regional associations Rhineland and Westphalia-Lippe each hold just under 1 percent, which are public authorities in local self-government.

In view of the different ownership structure, one can come to the conclusion: The state of North Rhine-Westphalia, as Portigon’s sole owner, wants to pass cum-ex risks on WestLB and the resulting tax claims to the EAA and thus to organizations that are closely related to local authorities. The Erste Abwicklungsanstalt (EAA) is concerned with considerable sums of probably more than 500 million euros. According to the annual report, your equity (share capital) amounts to 500 million euros and would therefore possibly be used up in the event of a defeat in court.

What those involved say

The EAA confirms that it has been served with a lawsuit by Portigons “for exemption from tax claims or reimbursement of taxes already paid”. A spokeswoman also announced: “Erste Abaltung still considers this claim to be unfounded and has applied for the full dismissal of the claim in its response.” defend the portigon.

Plaintiff Portigon did not want to comment on the FAZ. Portigon’s spokesman only confirmed that “proceedings against the EAA are pending before the Frankfurt Regional Court”. When asked why the state allows a company in its possession to sue another, in which it is part owner, the Ministry of Finance of North Rhine-Westphalia had a spokesman say: “Portigon AG and Erste Abwicklungsanstalt are independent legal entities. They are subject to their own rights and obligations, according to which those responsible have to safeguard the respective company interests as best as possible. This also includes the pursuit of any rights you may be entitled to. “

This makes it unlikely that the dispute will be settled out of court. Should the EAA lose against Portigon before the Frankfurt Regional Court, the savings banks could also put money into the EAA and have to pay for the cum-ex risks of their old Landesbank.