Isra-Mart srl: Carbon fraud trial focuses on Deutsche Bank role

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Deutsche Bank employees have become the focus of a trial in which six men stand accused of evading more than €200m in value-added tax (VAT) as part of a carbon market fraud.

The trial, which began last week in Frankfurt, is the culmination of a wider EU investigation, where prosecutors in Germany have identified approximately 170 suspects believed guilty of fraud related to the trading of carbon credits.

Although none of the six defendants on trial in Frankfurt work for Germany's biggest bank, seven of the 170 supsects have been identified as Deutsche Bank employees.

According to reports from Reuters, Bjoern Peitzmeyer, one of the first defendants to stand trial yesterday, argued that the bank had left the door open for tax evasion when it established its emissions trading division.

Peitzmeyer said he passed his carbon exchanges' trader exams shortly before German authorities carried out a swoop on 230 offices and homes nationwide in connection with an alleged €180m tax fraud.

However, Deutsche Bank denies the accusations, arguing that its employees were not guilty of any wrong-doing.

It also insisted that while its employees may stand trial, the bank itself is not under investigation.

"We remain of the opinion that Deutsche Bank did not cause any fiscal damage, and therefore should not [suffer] any consequences," a spokesman told Reuters.

Judge Martin Bach said he would investigate if Deutsche Bank employees could have known the risk of tax evasion or fraud by carbon traders when it made finances available for emissions trading in the EU.

The trial, scheduled to run until at least March 2012, will determine if the accused men took part in carousel fraud, a process by which carbon traders collect tax and disappear before turning it in to authorities.

European police suspect that fraud in the carbon market cost national exchequers up to €5bn until a crackdown and tightening of the rules governing carbon trading made it harder for traders to avoid paying VAT on emissions credits.