German Billionaire
“Berger’s first reaction was remarkable -- he said: ‘That can’t be possible,’” Frey recounted in court. “But then he scrutinized the legal details very diligently and saw it was possible.”

Berger and Frey quickly copied the business model and did the first Cum-Ex deals with the late German billionaire, Rafael Roth, who invested 50 million euros in transactions related to Cum-Ex. The transactions were done with the help of Unicredit’s HVB unit in London where Shields and Diable, the two defendants in the Bonn trial, worked at a trading desk under Paul Mora, another suspect in the Cum-Ex probes. Mora’s lawyer said his client isn’t a defendant in the Bonn trial, making the presumption of innocence even more important.

But in an interview, Berger refuted Frey’s testimony, calling his former colleague “an egomaniac, opportunist,” and “a bad lawyer.”

Major Returns
Berger emphasized in the phone conversation from Switzerland that Cum-Ex trades were legal a decade ago and the government wants to criminalize the conduct after the fact, “a grave violation of the rule of law.”

Still, the technique Berger and Frey pioneered, where shares were bought and sold ahead of a dividend date allowed people to make a lot of money, fast. Investors could make 15% on a 50 million-euro stake during the six-month German dividend season, according to Frey. Repeated, that meant 30% a year.

Frey said that with the right accounting perspective, it was even more.

“You could also say it was 60% per year, since the money was only needed for three months,” he said.

Berger and Frey later formed their own law firm -- and also a group of companies called OAK -- to channel profits from their clients, according to Frey. The duo introduced Cum-Ex to Hamburg-based private bank M.M. Warburg, which traded on its own book and gave half of it profits to the two lawyers. Berger and Frey also worked closely with Ballance Group, founded by Mora and Shields in 2008, and also took a share of their profits. Warburg declined to comment.

From 2006 through 2011, Cum-Ex was widely profitable for investors and the two lawyers. Frey said that both he and Berger each made 50 million euros, much of it likely coming from profit sharing with their clients. Berger, who now lives in Switzerland, said he “personally” didn’t make any money as the proceeds from went to the law firms he worked with or to OAK. He didn’t have any shares or say in the OAK group of companies, he said.

Game Over
Cum-Ex reached its peak in 2010. By the end of that year, new rules made it impossible for funds to do the trades, Frey said. He sent an email to clients with the message “Game Over.”