Triad Group Plc Relevant Evidence : French Sodexo operating as HMP Bronzefield - 22 June 2020 - "Breakfast at Bronzefield" (Campbell, nom de plume): incarceration of those who have lost hope

Breakfast at Bronzefield: A Book from Inside Britain's Largest Women's Prison

BY SOPHIE CAMPBELL

JUNE 01, 2020 

This month, former TLC Free Read recipient Sophie Campbell shares the story of her journey to self-publication for her powerful memoir, ‘Breakfast at Bronzefield’, which depicts her experiences inside HMP Bronzefield, the UK’s largest women’s prison.

When I made the decision to write about my experiences inside the UK’s largest women’s prison – HMP Bronzefield – the road ahead seemed pretty clear. First, I would try and find a literary agent, and second, hope that a publishing house would be keen to publish my story. 

After a few rejections from a number of agents I received an invite from a well-known agency to discuss my project in detail. I couldn’t have been more excited, but when I arrived at their offices one afternoon, I was unable to set aside the feeling that something wasn’t right.

I talked with the agent about how keen I was to use Breakfast at Bronzefield to change the narrative concerning women in prison. However, I was told rather breezily that while my lived-in experiences all sounded very interesting, wouldn’t it be better if I wrote about BAME female prisoners who struggle with drug addiction, prostitution or attending their court appearances. The assumption being that ethnic-minority prisoners are more likely than their white counterparts to struggle with literacy.

An awkward silence soon followed when I said most of the BAME women I encountered in prison had degrees or failing that had worked for years. Very few I befriended had been convicted of drug or solicitation offences, nor were they single mothers with a violent partner lurking in the background. My experiences with that agent convinced me that I had two choices; either change the book so that it would better resemble the female prisoners people have come to know in print or on TV, or else self-publish.

I immediately dismissed the first option. Why bother writing a memoir that says the same old thing or worse, downplays the reality of a situation? Growing up I was the first person to switch on the TV when ITV drama Bad Girls was airing – I couldn’t get enough of that show. When I went to prison, I fully expected to come across the familiar caricatures, but as most people know there’s a big difference between what we see on TV and what goes on in real life.  

I won’t pretend that everyone I met at HMP Bronzefield were saints – myself included – but only a handful fit the stereotype of being prolific offenders who float in and out of prison. Unfortunately, due to these stereotypes female prisoners are rarely given the opportunity to educate themselves inside an institution that continues to provide them with a gendered education, based on the assumption that women who offend do better in a ‘gender specific service.’ It’s no surprise that female offenders fare less well economically in comparison to men two years on from their release, as the training given is designed to tie them permanently to the home or low-paid employment.

I was determined to use Breakfast at Bronzefield to initiate meaningful prison reform which meant telling the complete truth about my experiences. An admirable challenge I thought at the time, but as a full-time student, I wondered how on earth I could afford to self-publish. It hadn’t taken me long to do the maths. The costs associated with hiring a freelance editor, proof-reader, typesetter, cover designer and printer added up to thousands of pounds. Having come across a few self-published books where it was obvious the author had cut corners with the cover or copy-editing process; I knew if I wanted to get my message across, I had to do things properly no matter what the price.

I managed to come up with the money and by October began the process of narrowing down freelance editors and cover designers with the assistance of SfEP, Design Juice and Clays Indie Publishing. I briefly toyed with the idea of hiring a PR agency but once I managed to convince the person in charge that although Breakfast at Bronzefield  would be independently published it was still worth a read, I balked at the fees quoted that included a 2K monthly spend for a minimum period of 2-3 months.

I realized at that point if I wanted the project to succeed, I would have to take on many different roles, from PR aficionado to NetGalley approver. In the beginning it wasn’t easy. However, once the editors began working their magic on my manuscript I had more free time to approach newspapers and bloggers with review requests.

Perhaps it had been naiveté on my part, but I didn’t expect my emails to be greeted with radio silence or else receive the standard rejection letters with a small comment added at the bottom informing me that they don’t review self-published titles. How on earth could I expect anyone to care about what happened in Bronzefield if no-one was prepared to feature my work?

By time COVID-19 hit I almost felt like delaying publication or giving up altogether. What stopped me was the realisation that I’d been in trickier situations before and hadn’t given up then. I was also determined to build traction for the book so that it could go some way to helping writers whose voices are still underrepresented in the publishing industry.

I’ve had many conversations with fellow writer friends who feel the pressure to tell a particular type of story because of their class, race or even sexual orientation. Stories that often do more harm than good as it gives the impression that people from certain backgrounds live, think and act in a near identical way, when nothing could be further from the truth.

Just when I thought the project would fail before it even started, I received word from the Literary Editor of the Irish Independent that she would run a review of the book closer to publication. After that, things started to pick up. Remarkably Editorial Expert, Liz Robinson, selected it as her ‘Liz’s Picks of the Month for June’ at LoveReading, the UK’s leading book recommendation website. A number of popular Goodreads reviewers, bookstagrammers and activists have agreed to read the book in advance of publication and audio publisher, W. F. Howes, recently made an offer to turn Breakfast at Bronzefield into an audiobook. 

Although I’m still a good few weeks away from publication, and success is far from certain I’m proud that I forged ahead with the project despite the challenges I’ve faced. 

I’ve always believed that you can’t sit around and wait for someone to hand you an opportunity. You have to be prepared to create your own opportunities and Breakfast at Bronzefield is proof of that. 

Breakfast at Bronzefield will be published on June 22nd and is available to pre-order from Foyle’s now.

SOPHIE CAMPBELL

Sophie Campbell is the winner of the Arts Council England Time to Write grant and the Koestler Flash Fiction and Short Story award.

https://literaryconsultancy.co.uk/2020/06/breakfast-at-bronzefield-a-book-from-inside-britains-largest-womens-prison/

Independent.ie

Breakfast at Bronzefield

Most women who leave prison have no home waiting for them on the outside. Eight in ten are likely to be convicted of another offence within a year. Only eight per cent will ever re-enter the workforce. They're 69 times more likely to die within a week of their release than women in the general population.

Sophie Campbell (not her real name) knows this only too well. She was one of those women. Despite being "small, quiet and reasonably well spoken", she found herself locked up for two years in one of the toughest women's prisons in the UK on charges of GBH and assault against police officers.

Thankfully, she defied the statistics. Within two weeks of her release, she had a job. Within a year, she'd secured a place at a good university. Grateful for her good fortune, she has now written an pseudonymous account of her experiences to "expose the abuses that occur inside female prisons", and to help women navigate the pitfalls that face them on release.

She was first sent to HMP Bronzefield on remand while awaiting trial. The largest women's prison in the UK, it boasts of being "dynamic and forward-thinking", but if that really is the case, it must have changed an awful lot since the author was within those walls.

The privately run institution that she describes so vividly is one in which violence, hierarchies of control and racism (the author is black) were an everyday feature, and in which the welfare of vulnerable young women was routinely put at risk.

That's probably why the first thing that happens on arrival is that she's asked to sign a non-disclosure agreement not to reveal anything that goes on inside.

Within a week, she is used to the regime and its rules. She learns how things work. How the women insult one another's looks and body odour as a way of dealing with the lack of control over their own appearance. The way the poorest inmates, most of whom come from deprived backgrounds in London, wear the most expensive trainers and designer clothes as a mark of status. The wings are full of addicts, their ages impossible to tell because their bodies are so ravaged by drugs.

Campbell didn't expect to be there long. In fact, she is in due course convicted of

the violent offences with which she's charged and sent to another prison, HMP Downview.

She's no angel. There are physical confrontations with prison staff from which she doesn't emerge with honour, even if the incidents are in a context where brutality is commonplace, treatment inconsistent, and it's often a case of prison officers' word against theirs, "and mine counted for very little".

This book has been written and self-published in order to help women in the same situation, but in that respect, the message is quite tough. You're on your own. 

Not all will have the mental resilience to turn their lives around. What the book does offer is hope.

If there's a message, it's that more can and must be done to help rehabilitate women who've been through the prison system. Sometimes that message gets slightly lost in a more general polemic against rising poverty, inequality and the slow-down in social mobility. That can read more like an election pamphlet than a personal testimony.

When she talks about "the root causes of crime", her argument often seems to boil down solely to economic circumstances. Campbell never fully addresses her own violent behaviour or the personal responsibility of the other women for their actions. "They'd lost hope," as she rightly puts it, but the innocent victims of the drugs trade and violent crime deserve some consideration as well.

The book would have benefited from the services of an editor at an established publisher, who could have helped fix some of its weaknesses, but that doesn't stop 

it being a powerful addition to the long canon of prison literature, as rough and authentic as the world it describes.

29 November 2005 

Not provided by AMF to TRD Board nor to MM on 1 December 2005 

when he required MM to face disciplinary blind to the charges against her

INDEMNITY BY ALLIANZ GROUP PLC 

under Public Interest Disclosure Act 

Item: McGrigors give notice through A&O to those who indemnified the Sponsor on IPO of Triad Group Plc on 18 March 1996 including Alistair McIntyre Fulton, selling shareholder. 

MM covered by deed of counter indemnity (no benefit on float), from Abacus and Faulkes. 

AMF depended on MM for his personal protection but chose to exclude her from addressing this notice, preferring to hide behind A&O to characterise MM as a liar. 

A&O file reference is that of MM charged with safeguarding the assets of the enterprise including goodwill (reputation) as well as its officers including Company Secretary 

2 February 2005 15.45

Letter by e-mail David Wootton to mira.makar@triadgroup.plc.uk

Executive Deputy Chairman, Finance Director, Group CEO

Triad Group Plc  

MM: right to be heard at audit committee, delegated committee of board

(corollary: meeting cannot be convened without MM, CFO)

Recorded by Paul Newman 17 March 2006

before the court (QBD, Court of Appeal) June 2009

[2009] EWHC 1715 (QB) 17 July 2009 

[2010] EWHC (Civ) 197- Jackson LJ- 18 February 2010 

- permission granted - 

cross examination/ examination in chief by Charles Phipps 

Instructed by Simmons & Simmons LLP

June 2009 

re- aired 12 February 2019, Julian Knowles QBD

Record of instructions accepted by Allen & Overy 

2 February 2005 22:48 

Companies Act 1985 Section 459 

prejudice to minorities petition 

Triad Group Plc 

Chancery Division

Companies and Bankruptcy Court

14 July 2020 and 11 August 2020 

 4 February 2005 to 4 February 2021 

sixteen years since the identity of Triad Group Plc 

was used to publish an RNS  

and the "BUY" recommendation was withdrawn by Evolution (Investec)

 Evidence provided to the Ministry of Justice 

Defamation incorporating slander and libel 

voluntary disbursements (those incurred for a purpose) 

can never be recovered from someone else

8 November 2013 

22 January 2019 

Alistair McIntyre Fulton makes a foray into court to seek 

unilateral relief (Part 8, not Part 7)

for damage to his reputation and credibility 

which he brought on himself by 4 February 2005 and did nothing to undo 

4 February 2005 - 4 February 2021 

Evidence: 

Authority Freshfields Bruckhaus Deringer selling "opinions" on which Canadian Maple Bank GmbH relied to promote schemes where ownership of securities was kept secret ("loaned" to a trader, ie true owner gave up right to trade for period, and credit for dividend tax was claimed twice). Profit extracted through Maple Bank gmbH Canada branch (KPMG liquidator) whilst German liquidator assumed standing in German courts and "settled" for token amounts. 

Parallel with 2006Folio676; 2006Folio783; 2006Folio962 the "Guy Hands" case, Herbert Smith LLPv partners trading as Baker Tilly, a firm and Shipwright (VAT barrister and Tribunal judge). Shipwright admitted and gave conduct to the partners (BLG), who asset stripped their operation and squatted in Chancery to lose a trial (25.9.08), with the embargo'ed judgment being notified by BLG to Markel "professional negligence" insurer. These admitted in May 2011 they were not informed the partners had been sanctioned by exclusion by ICAEW, which, perversely, allowed them to retain membership as individuals. Fulton JR Burrows were taken in when contacting them 9.3.06 to tell them PwC had decided to resign, insider information which the partners proceeded to use to transact for years since. 

Fulton has no-one to blame but himself for agreeing on 19 January 2005 to go secretly to PwC on 20 January 2005 and predictably succeeding in driving them out with together associate Abacus, principal investor from 1988, without whom he would have been left with Chris Morris, Touche Ross receiver, now Deloitte, from 1987. 

Fulton did not admit to this until the end of October 2006, by which time he had driven out PwC; Abacus; Evolution (buy recommendation gone 4.2.05); members (disenfranchised by members meeting August 2006); tax advisers and agents, Egan Roberts with Chilterns; blocked the enforcement of the indemnity under the articles of the company; excluded creditors from the accounts; forced out Bank of Scotland; did not attend on 17.3.06 (Paul Newman and Mark Harwood) and waited to January 2019 to file for relief for reputation and credibility damage to himself (alone). 

On 13 January 2005, DH Wootton advised MM for and on behalf of Triad Group Plc that PwC would put up a smoke-screen so no independent auditor would see what had happened; stay in until the last possible moment, then depart causing the maximum damage all around.

On 28 January 2005 MM left a voicemail for A&O confirming that PwC were on side and aligned with TRD, wholly unaware that Fulton had de-railed the annual risk review together with PwC which had happened on 13.1.05 pm, 

In June 2009 Mark Harwood gave testimony in QBD that PwC's adverse report under CA 1985 s221 and exit had been orchestrated by Tim Pope and the PwC risk and legal team. [2011] EWHC 3950 (Comm) Steel J 11.7.11 

It is obscure the form of relief Fulton sought for reputation and credibility damage to himself (January 2019) and which has not been caused by him. Yvonne Dixie signing public company accounts 1995 to beyond 2006, in a dormant of which Fulton was Managing Director when it was active in 1995, and going on to complain "Mira is bullying Richard Harris" is neither a reason to go to PwC secretly on 20 January 2005 nor incarcerate MM for ten months in high secure prison Bronzefield. His silent treatment together with that of Hambleton from January 2005 puts the pair of them on a par with Freshfields and the consequences will be what they will be. 

7 February 2021  

pp0929 06 09 28 2006 Folio 962 Claim.pdf Feb 23, 2018, 6:31 PM by Custodian of Information

on page Additional Resources (replication Dropbox 12 10 23 in Resources Apr 2, 2013, 7:00 PM)

Additional Resources (replication Dropbox 12 10 23 in Resources Apr 2, 2013, 7:00 PM) ‎>‎ pp0929 06 09 28 2006 Folio 962 Claim.pdf

pp0927 06 07 06 2006 Folio 676 Claim.pdf Feb 23, 2018, 6:31 PM by Custodian of Information

on page Additional Resources (replication Dropbox 12 10 23 in Resources Apr 2, 2013, 7:00 PM)

Additional Resources (replication Dropbox 12 10 23 in Resources Apr 2, 2013, 7:00 PM) ‎>‎ pp0927 06 07 06 2006 Folio 676 Claim.pdf

pp0932 07-03-26 2006 Folio 676 Feb 23, 2018, 6:31 PM by Custodian of Information

on page Additional Resources (replication Dropbox 12 10 23 in Resources Apr 2, 2013, 7:00 PM)

Additional Resources (replication Dropbox 12 10 23 in Resources Apr 2, 2013, 7:00 PM) ‎>‎ pp0932 07-03-26 2006 Folio 676

https://www.legal500.com/gc-magazine/special-feature/der-freshfields-skandal/

Der Freshfields-Skandal

When the German government says of a law firm that it ‘cannot conceive that new work will be placed there’, that firm has a major problem. Does that reputational damage threaten Freshfields’ global practice, and what questions does it pose to the firm’s new leadership?

GC Online

Freshfields Bruckhaus Deringer

September 2020 interviews - update January 2021 

It’s 9 September in the German parliament. Stefan Liebich of the democratic socialist party, Die Linke, stands up to quiz finance minister Olaf Scholz, a member of the Social Democrat Party. His question:  ‘Have there been any thoughts on your part whether firms like Freshfields or others should be excluded from receiving future instructions?’

Scholz responds: ‘In relation to the law firm you mentioned… I cannot imagine that new assignments will be placed there’.

For any normal law firm that would be a body blow. For an international firm with 27 offices in 17 jurisdictions, representing financial institutions and governments, as well as national and multinational corporations, it is a humiliation. How did the oldest international law firm in the world end up with such a public slap-down? And what prompted Scholz, one of the candidates to succeed Angela Merkel, to suggest the German government should stop instructing Freshfields?

The answer lies in the cum-ex tax fraud scheme, widely acknowledged as the biggest tax scandal in Germany’s history, in which Freshfields Bruckhaus Deringer has been identified as a major player. Since its offices were first raided in the autumn of 2017, Freshfields has been hit with a steady stream of bad press for its involvement in the scheme. 

In August 2019, liquidators of the now defunct Frankfurt-based lender and Freshfields client, Maple Bank, which conducted cum-ex trades, sued the firm for damages. Freshfields agreed to a €50m settlement.

CUM-EX: WHAT IS IT?

The cum-ex scandal involves a controversial dividend arbitrage trading practice, which took advantage of a loophole in German tax law. It involved banks and stockbrokers rapidly exchanging shares with (cum) and then without (ex) dividends between three parties, in a way that enabled them to hide the identity of the actual owner. At least two of these parties then claimed rebates on capital gains tax that had only been paid once. These trades were executed between 2001 and 2011, and were formally prohibited in Germany in 2012. Because of these deals, billions in tax went uncollected by the German state. Other countries beyond Germany have also been affected by the cum-ex tax fraud scheme. Across Europe, cum-ex trading is said to have cost taxpayers up to €55bn.

Reporting has largely focused on investigations surrounding the departure and subsequent arrest of partner Ulf Johannemann, the firm’s former international head of tax, in November 2019. More recently, in June 2020, another tax partner, who was the firm’s last specialist for tax products in Germany and an alleged adviser on cum-ex products, also left Freshfields and was charged with aiding and abetting serious tax evasion.

Freshfields’ direct response to the whole matter has appeared subdued. The fact that the firm created a  German ethics committee, with a code of ethical principles and rules of conduct, in May 2020, perhaps was a belated acknowledgement of the need for change but was unable in practical terms to extricate the firm from the scandal.

What is clear is that the cum-ex scandal has shaken the entire tax sector and in turn inspired reflection on the professional and social responsibilities of major actors such as Freshfields. As a result, law firms’ approach to the circuitous issue of ethics now has greater impact on law firm selection decisions.

We spoke to top general counsel (GCs) in Germany to gauge their reaction: to what extent will ethical standards play a role in choosing a law firm? Should a law firm’s work be not only legally but also ethically and morally sound? Will GCs be content to work with Freshfields (and other firms) implicated in the cum-ex scandal? And what reputational damage – if any – will those firms suffer?

LEGAL OR ILLEGAL? MORAL OR IMMORAL?

Structured finance in tax law is not new, departments for tax-optimised products at financial institutions are not new and, indeed, tax arbitrage and dividend stripping is neither new nor criminal. To the frustration of tax lawyers, some falsely lump together cum-cum and cum-ex deals – two different types of dividend stripping – and most would agree that the illegality of cum-ex is not as straightforward and quite as obvious as, say, the carbon trading tax fraud (which has similarly been dubbed the ‘fraud of the century’).

Nonetheless, to  many tax lawyers, cum-ex deals, which essentially involve claiming tax credit twice on taxes only paid once, simply didn’t feel right. The market quickly divided into those who gave legal opinions and those who didn’t. Freshfields positioned itself in favour of these trades and their approval was key to banks going ahead with the transactions. Importantly and – in retrospect – embarrassingly for Freshfields, two of its leading competitors, Linklaters and Hengeler Mueller, both took a more conservative approach – and did not provide the necessary legal opinions to make cum-ex deals viable. So it appears that Freshfields was the outlier – albeit in a highly profitable sector of the tax market.

Looking back, tax lawyers agree that attitudes to tax avoidance have changed since the 2007/08 financial crash. Advice on tax reduction was previously very much the primary focus for many tax departments, and aggressive tax planning was not out of the norm. While this may still be the case for some, the cum-ex scandal has no doubt contributed towards a shift in attitudes. These days, the new key theme is risk minimisation. Clients’ appetite for risk has decreased dramatically and, as one tax partner at a large international firm points out, there are now even sustainability reports in tax law. Today, there is a completely different kind of awareness than there was ten years ago – and that new approach goes hand in hand with a call for transparency.

One might still argue that the tax adviser’s job is to assist the client with paying only those taxes that are required, and the point of tax advice is to arrange fiscal relations in order to pay the least taxes necessary. At the same time, however, as a GC and managing director at a major software company points out: ‘As an independent body responsible for the administration of justice, the lawyer also has obligations to society that exclude representing unethical practices’. While this latter commitment might have limitations, for instance in relation to representation in criminal proceedings, the ethical component of legal advice is actively influencing companies‘ choice of law firm.

Traditionally, ethics and law go hand in hand. Law firm partners should have an innate moral compass. On that basis no distinction should be necessary between legally sound and morally or ethically justifiable advice, and for corporate counsel this distinction should not play a role either when mandating a firm. Ethics committees and supervisors should therefore – in theory – be superfluous. But that traditional approach is now seen as old-fashioned and incompatible with some aggressive profit-driven clients demanding aggressive profit-driven solutions. The danger for any law firm is that it is obliged to adopt the moral compass of its important (high-profit) clients and place money-making over traditional ethics. That is a problem that faces all major firms, not just Freshfields, although it is Freshfields that is providing a case study in how high-profit work can come at a reputational cost.

What is significant from our conversations with German corporate counsel is the indication that client prerequisites are changing. While ethics were ‘taken for granted as an unwritten law’ (in the words of the GC at a major German manufacturer), that is seemingly going to change, with a greater expectation on firms to take responsibility for clear ethical policies and positions.

Today, nobody would deny that the cum-ex scheme is a crime against the taxpayer, so how is it that some tax lawyers and some firms – not just Freshfields – committed to approving these deals? Several GCs have commented on corporate law firm culture and what they perceive to be changes in law firm behaviour: ‘These institutions change people’, according to the head of legal at a multinational financial services company, adding that they believe there is ‘an attitude that everything which is not legally prohibited is allowed.’

‘TWO ROTTEN APPLES DISCREDIT THE ENTIRE FIRM’

So, who should take the blame for overstepping ethical boundaries and getting involved in what later transpired to be a huge tax evasion scheme at the taxpayers’ expense? From the GCs’ point of view, some maintain that the focus should remain on individual lawyers or, at most, specific legal teams.

Possible misconduct by individuals does not automatically mean misconduct by everyone else. But the cum-ex scandal has shown that an individual’s actions may lead not only to that individual’s reputation being damaged but that of an entire department will likely suffer as well. By extension it is entirely feasible that repercussions could end up being firm-wide. 

As a senior regional counsel at a medical technology company puts it: ‘Two rotten apples discredit the entire law firm… the behaviour of individual representatives of a law firm suggests the approval of unethical behaviour by other colleagues.’

Whether flawed culture has afflicted Freshfields is uncertain, but the danger for the firm is one of perception: whether those two malefactors are seen (fairly or unfairly) to indicate a deeper-seated problem in the larger organisation. At the very least, the crisis poses questions over internal checks and balances. The GC at a US retail company makes a blunt assessment: ‘The firm’s role in the scandal must be made clear and there needs to be a statement about the firm’s values, to which it will adhere in the future.’ Freshfields’ May 2020 code of ethical practice might have sought to answer the second part of this, but the risk for the firm is that it is seen as no more than a belated PR exercise to try to distance itself from the ongoing bad publicity without directly confronting the part it played in cum-ex matters.

Conversations with German GCs show that specific individuals’ or departments’ involvement in unethical behaviour is the most relevant factor. However, when it comes to securing new business, the focus is on the entire law firm.

Beyond not wanting to be associated with questionable ethics, some corporate counsel already go one step further and consider themselves to be ethical guides whose job is to set out the right path not solely on a legal level. One respondent, in their role as in-house counsel at a German consumer electronics company, sees themself ‘as a kind of moral compass for the company’. As such, mandating a firm involved in the cum-ex scandal goes against the grain.

‘Legally clean work is no longer enough today,’ they comment. Instead law firms are subjected to a holistic analysis by legal departments, and this in turn means ethics and morality are increasingly and more explicitly incorporated into corporate decision-making processes. If firms do not meet ethical standards, this may be reason enough not to mandate them. This is where reputational damage potentially has a snowball effect. Corporate counsel will be reluctant to be seen as approving of seemingly unethical behaviour. As a GC at a food services conglomerate states: ‘If some clients avoid the firm, remaining clients could feel they have been thrown into the same pot morally.’ In short, clients end up needing to justify mandating a firm whose ethics have already come under question and whose reputation has already taken a hit.

Freshfields has already come close to this scenario. In February, the giant German semiconductor manufacturer Infineon (market cap of $30bn+) was forced to justify retaining the firm as legal counsel after one of its shareholders challenged the decision’s ethical standards. ‘The board of directors instructed the law firm Freshfields, which is said to be responsible for what is probably the biggest tax robbery in post-war history,’ stated the shareholder, pointing to a violation of Infineon’s code of ethics and its code of business conduct.

Fairly or not, that is the context in which finance minister Scholz indicated that the German government should no longer instruct Freshfields. If the German government will not instruct the firm, then the pressure on GCs (German and non-German) not to appoint it may be ratcheted up another notch. The obvious danger for Freshfields with state intervention of this kind is that a local problem becomes a global problem – and that the governments of other countries decide that they should distance themselves from the firm.

The resounding message from clients is that any firm involved in an alleged scandal should not simply keep quiet. Instead, the firm should openly address and deal with its behaviour.

As a first step, a firm should ‘fully clarify [the involvement in the scandal] and, if necessary, distance itself from unethical individuals’, says a senior regional counsel at a medical technology company.

A director of legal operations at a multinational pharmaceutical company agrees: ‘What matters to us is that law firms deal transparently and consistently with the issue.’ This includes ‘open communication and consequences of possible participation’. They point towards the need for documentation of measures that are being taken to prevent such a situation from arising again, sustainable instruments for monitoring and control, as well as training.

On top of that, they call for ‘a very clear statement from the firm’s management on the ethical principles to which the employees are obliged’. The Infineon example illustrates the dangers for firms not perceived to have taken up a proactive commitment to ethical standards, where that commitment has often already been taken by the client itself.

Indeed, some GCs report that they already include ‘ethical standards and values’ in their assessment when selecting preferred legal advisers, and law firms are increasingly measured against codes of conduct. This also reflects the larger trend within corporate companies, and the same is now expected of their business partners, including their legal advisers.

AN EXISTENTIAL THREAT?

No doubt, the consequences of being involved in the cum-ex scandal are existentially threatening for some individual financial, and also some legal advisers in Freshfields and other law firms (Freshfields was not the only law firm implicated in the global cum-ex market).

But it goes beyond the individual. As the cum-ex tax fraud scheme has engulfed law firms across Europe, departments and firms as a whole may need to delve deeper, openly evaluate the ethical aspects of their own practices and put new measures in place that reflect today’s call for transparency, accountability and ethical standards.

The results of our informal survey of German GCs showed that 88% agreed that firms involved in the scandal would suffer reputational consequences, and the same percentage claimed to take ethics into consideration when selecting a firm. Less than a third claimed to be content to work with implicated firms.

For months, Freshfields took little obvious public responsibility for its cum-ex advice. Only in late February did the firm for the first time issue a self-critical statement, when managing partner Stephan Eilers spoke with the German weekly newspaper Die Zeit. Previously, the firm’s official line focused entirely on the legality of its advice with no comment on the criminal legal proceedings against its partners or the damage claim settlements over its advice to the now defunct Maple Bank.

In a tentative change in communications, Eilers acknowledged that its advice in the context of cum-ex deals is not a glorious chapter in the firm’s history. The timing of this first open recognition of reputational damage strongly suggests it was spurred by the Infineon incident: it shortly followed Infineon’s AGM, where the Freshfields client was forced to justify using the firm.

Only a few months later, in May, Freshfields recognised the need to address its ethical standards by establishing an ethics committee and publishing its code of ethical principles and rules of conduct. But by then much harm had already been done. The clear message from some German GCs is that they still feel they are waiting for clarification from Freshfields on the role the firm played in cum-ex advice. Instead, Freshfields has become known for a wall of silence.

‘What matters to us is that law firms deal transparently and consistently with this issue.’

What will the firm do next? One suggestion from the reputational-damage casebook might be to appoint a credible outsider to conduct an independent review, which would then be published. That might go a long way to reassuring clients that the firm retains its moral and ethical compass. The model might be the searingly honest review commissioned by house-builder Persimmon in 2019 (which confronted the issue of whether high earnings had come at an unacceptable cost). There is no historical precedent for a Magic Circle firm doing that; Freshfields had no comment in response to this suggestion being put to them.

GCs report that relationships with firms allegedly involved in the scandal are likely to come under increased scrutiny, although relationships would not be immediately terminated. However, when it comes to new instructions, alleged involvement in cum-ex deals is seen as much more likely to rule out a firm from selection.

In short, existing relationships may – for now – continue, albeit harmed, while new relationships have unquestionably been jeopardised: ‘I consider it impossible to instruct law firms known for such practices,’ says one GC. ‘Freshfields Bruckhaus Deringer will suffer reputational damage for a long time due to Ulf Johannemann’s advice,’ states another.

There is also an expectation that there will be more accused parties, more proceedings and more who will suffer the consequences. When speaking to tax lawyers at firms and to their clients there is certainly the sense that the entire sector has suffered a blow.

For Freshfields’ new leadership team of senior partner Georgia Dawson and the three joint replacements for Eilers – Rafique Bachour, Alan Mason and Rick van Aerssen – these problems are first-hand and real. The firm’s reputation has been trashed in Germany in a way that would have been inconceivable a few years ago. There may be other global issues to contend with, ranging from the strategic (can the firm establish itself in the US and what additional pressures do those efforts place on the already brittle lockstep pay structure?) to a series of significant departures (notably that of M&A co-head Bruce Embley to Skadden, Arps, Slate, Meagher & Flom on the eve of Dawson’s election). However, those may yet pale into insignificance compared to the potential damage to the firm’s standing caused by the cum-ex scandal. Ultimately a Magic Circle law firm trades on its reputation – damage that, and you can end-up damaging the whole firm.

STOP PRESS

At the end of January it was reported that Freshfields had made a voluntary payment of €10m to the Frankfurt Public Prosecutor’s Office (PPO), and that the PPO no longer pursuing the firm as a concerned party in connection with Maple Bank. Freshfields said that the move followed “constructive dialogue” with the PPO and had not admitted guilt and/or liability. While Freshfields’ hope will be that a line can be drawn underneath the affair, their efforts to move on seem unlikely to be helped by the cum-ex scandal rumbling on in Germany and beyond (with Danish prosecutors now investigating and charging traders with tax fraud). Cum-ex long since moved from dramatic incident to long-running saga, and the consequent fundamental problem for Freshfields seems likely to be one of long-term reputation, heavily damaged by association with the largest tax scandal in modern European history and unanswered questions over how the firm allowed itself to be implicated in the first place. €10m will not buy back that reputational damage.

Research: Anna Bauböck, Editor of The Legal 500 Deutschland.

Commentary: John Pritchard.

All interviews with German GCs and corporate clients were carried out in September 2020.

 https://www.ft.com/content/90212cf6-562b-11e9-91f9-b6515a54c5b1

            Freshfields sued over role in German bank’s tax scandal

Liquidator of failed Frankfurt-based lender Maple Bank sues law firm for €95m in damages

Olaf Storbeck in Frankfurt 

APRIL 3 2019

Freshfields Bruckhaus Deringer, the ‘magic circle’ law firm, is being sued for €95m over its advisory role in controversial share-swapping schemes that allegedly allowed investors to reclaim billions of euros in tax they never paid.

The civil lawsuit against the London-based law firm was filed at a Frankfurt regional court by the liquidator of the defunct German lender Maple Bank, a court spokesman told the Financial Times.

Maple Bank was closed down by the German financial regulator BaFin in 2016 as it was overwhelmed by a demand to repay several hundreds of millions in taxes that were illicitly claimed in so called “cum-ex” trades linked to the lender. 

These transactions, which exploited a design flaw in Germany’s tax code, allowed clients to trick tax authorities into refunding dividend tax that was never paid. 

Freshfields advised Maple Bank on the legality of cum-ex transactions.

The lender also made headlines in 2008 when it engineered Porsche’s failed takeover attempt of Volkswagen.

In the lawsuit, Maple Bank’s Frankfurt-based liquidator CMS Hasche Sigle claims that Freshfields’ advice was that cum-ex deals were with an “overwhelming probability” legal. 

The lawsuit was first reported by Handelsblatt on Wednesday. 

Joachim Kühne, a partner of CMS Hasche Sigle, confirmed the lawsuit but declined to comment further, pointing to the confidentiality of the process. 

A Freshfields spokesperson said: “We are examining the statement of claim in detail and will fully defend ourselves,” adding that the law firm does not believe there is “any basis for claims against our firm”. 

Two Germany-based Freshfields partners are also subject to a criminal investigation into their potential role in “cum-ex” transactions but they have not been charged with any wrongdoing, according to people familiar with the matter.

Freshfields declined to comment on the criminal probe. 

Cum-ex deals involved a trader borrowing a block of shares to bet against them using a technique called short selling in the run-up to dividend day and then selling them on to another investor. 

A loophole in the German tax code meant parties on both sides of the trade could successfully claim a refund of withholding taxes paid on the dividend — even though authorities contend only a single rebate was due. 

German finance minister Olaf Scholz last year called cum-ex deals “a real scandal” and said he was “furious” that “all honest citizens” were defrauded of billions of euros in lost tax receipts in these transactions. 

An investigation published last October by Correctiv, a German non-profit investigative journalism group, and 19 news organisations, cited leaked spreadsheets that show “an organised theft from the tax coffers of at least 10 European states, besides Germany” that it claimed had cost taxpayers about €55.2bn.

https://www.handelsblatt.com/english/finance/dividend-stripping-german-police-raids-freshfields-law-firm-in-tax-avoidance-probe/23695010.html?ticket=ST-1460849-oEUftgCjIKkA7V0h7y4v-ap6

DIVIDEND STRIPPING

German police raids Freshfields law firm in tax-avoidance probe

Investigations into a tax scandal led to a second raid on the Frankfurt office of British law firm Freshfields Bruckhaus Deringer. It is suspected of providing legal cover for dividend stripping.

11/23/2018 - 01:15 PM  

For the second time in a year, prosecutors this week raided the Frankfurt offices of the prestigious law firm Freshfields Bruckhaus Deringer. The raid marked an extension of the investigation of Freshfields’ involvement in dividend stripping, Frankfurt state prosecutors confirmed to Handelsblatt.

Although authorities refused to name individual suspects, there are now more than one hundred people under investigation in the probe. Dividend stripping (also known as “cum-ex”) was a form of tax minimization which claimed duplicate tax refunds on certain types of share dealing. The practice is now illegal and is thought to have cost the German taxpayer €12 billion ($13.7 billion).

Dozens of German banks and financial firms have been investigated, including Commerzbank, Deutsche Bank and the private bank M.M. Warburg. HSH Nordbank and LBBW, two state-backed regional banks, have been forced to repay hundreds of millions of euros. This month, prosecutors raided the Munich offices of asset manager BlackRock. Senior executives at the Australian bank Macquarie have been targeted by Cologne prosecutors.

Partners and tax experts under investigation

Handelsblatt has learned that the Freshfields raid focused on the firm’s relationship to Maple Bank, a Canadian lender whose German subsidiary was suspended by authorities investigating dividend stripping. It declared insolvency shortly thereafter. Those under investigation include two partners of the UK-based law firm, as well as one of its leading taxation specialists, prosecutors said.

Freshfields confirmed that the raid had taken place, but refused to answer specific questions. A spokesman for the firm said: “We remain convinced that our advice was legally sound. It was always in keeping with the current state of the law. We look forward to any court case with complete confidence.”

Until recently, the British law firm had every reason to be confident. As well as a distinguished, 175-year history, the German subsidiary had annual revenues of €405 million, with profits running at around €1.9 million per partner. Its declared goal is to be the best law firm in the world. But an unblemished reputation is crucial for this, and this has been thrown into doubt by the scandal.

“Tax optimization” was the technical term for Freshfields’ service to many dividend stripping clients. In other words, it advised them on the legal ramifications of the practice. As well as Maple Bank, clients included Deutsche Bank, Commerzbank, Dekabank, Barclays and Macquarie.

Trusting Freshfields' judgment

For many institutions, Freshfields’ judgment was enough to allay any doubts. Defense lawyers for Hanno Berger, a lawyer accused to masterminding many dividend stripping deals, including for Maple Bank, have submitted expert opinions from Freshfields as exonerating evidence in his case. They claim that Berger put absolute faith in the law firm's professional advice.

Berger is the main defendant in the Frankfurt dividend stripping investigation and co-accused in several other cases. After legal proceedings began, he moved to Switzerland, from where he continues to deny all charges, partly by referring to Freshfields’ expertise.

The first Freshfields raid took place in October 2017. A lawyer familiar with the Maple Bank case told Handelsblatt that the second raid suggests prosecutors have new prima facie evidence. Raids on major law firms are extremely rare, he said, and this one indicated that prosecutors had lost faith in Freshfields’ position.

In the past, Freshfields has had a close relationship with the German government. During the 2008 financial crisis, the company gave legal advice to the government, for which it was paid more than €5 million. In a widely-criticized move, the then finance minister later gave a well-remunerated speech at the firm.

In 2016, a parliamentary committee investigating dividend stripping found that Freshfields’ legal advice had regularly been used to assuage the doubts of auditors, regulators and investors. The parliamentary report condemned the law firm for continuing to support dividend stripping long after the practice was under legal investigation.

After Freshfields repeatedly refused to submit documents to the parliamentary inquiry, the committee took the unusual step of taking legal action against the firm to force disclosure. Ultimately Germany’s Federal Fiscal Court found in favor of Freshfields in 2016.

Ironically, documents which the law firm successfully withheld from parliament have now been seized by Frankfurt prosecutors.

Sönke Iwersen leads Handelsblatt team of investigative reporters. Volker Votsmeier is an investigative reporter with Handelsblatt. To contact the authors: iwersen@handelsblatt.com, votsmeier@handelsblatt.com