Luxembourg court frees whistleblower

PwC sought jail for its employees and a fine for journalist who spilled beans on tax avoidance.

On May 15 the Luxembourg Court of Appeal finally set aside PricewaterhouseCoopers (PwC) employee Antoine Deltour’s 2016 theft conviction for having leaked the international audit firm’s client files – 28,000 pages of tax files – that precipitated the so-called LuxLeaks scandal.

The court found that in terms of European Union laws, he was protected from prosecution as he qualified as a legitimate whistleblower in the public interest.

The document leak exposed the shocking extent of tax avoidance practices in Luxembourg used by scores of major multinational corporations to avoid tax and precipitated an EU-wide scandal in 2014.

But it was not Amazon, Pepsi, McDonalds, Deutsche Bank, Ikea, energy provider EON, Apple, Heinz, FedEx, Disney, or any of the other 330-odd multinational corporations that managed to secure  huge tax breaks worth billions of Euros in Luxembourg, that were put on trial.

Nor was it the politicians that have promoted such activities for decades, or the tax official Marius Kohl at whose desk the bulk of these sweetheart “tax rulings” were dispensed.

PwC employee Raphaël Halet received a custodial sentence which was later reduced

Instead, in April 2016, Deltour, his colleague Raphaël Halet and journalist Édouard Perrin were put on trial in the Grand Duchy’s high court, charged with theft, illegally accessing a computer database and passing on “trade secrets”, as well as aiding and abetting those acts.

According to Luxembourg law, the three faced up to ten years in prison.The prosecution wanted 18-month jail sentences for the PwC whistleblowers and a fine for journalist Perrin.

Observers anticipated that the court would attempt to save face by delivering a minimum sentence – a harsh penalty would only have done further political damage. Some were astonished that the accounting firm PwC even pressed charges. Wasn’t the scandal itself embarrassing enough?

In Luxembourg, 80% of all “intellectual property” is tax-free, as a consequence a lot of these companies have been amassing their vast profits in the grand duchy.

Perrin, a French TV journalist, was the first person to publish the story back in 2012. But it was not until 2014, when German newspapers picked up on the affair and the newly elected president of the European Commission, Jean-Claude Juncker, came under massive pressure, that it became a full-blown scandal.

TV journalist Édouard Perrin (left, with his lawyer – on right of picture) faced a fine for his exposé of Luxembourg tax avoidance. He received several awards for his coverage of the story including Journalist of the Year  at the Assises du Journalisme in France in 2016.

Juncker, who had been prime minister as well as finance minister in Luxembourg, tolerated if not pushed such practices for years. Nevertheless, he swore there was nothing illegal about such business deals and scraped past removal from office when the scandal broke.

Meanwhile, an investigating com-mittee in the European Parliament is attempting to clear up the affair, and EU finance ministers have agreed on various policy changes.

French Finance Minister Michel Sapin expressed “solidarity” with the whistleblowers, saying they, and in particular Deltour, were defending the public interest. “It’s thanks to him that we’ve been able to put an end to the opacity that prevented European countries from fully knowing the tax status of a number of large companies in Luxembourg,” Sapin told the French National Assembly.

“Whoever comes forth with information that is in the public interest must be protected,” said Fabio De Masi, a European parliamentarian who was scheduled to testify for the defence. “Many Europeans know that Antoine Deltour did the right thing. He should be honoured for his actions, not persecuted. But justice will be served.”

Two months later the two main accused were found guilty. Deltour was sentenced to 12 months’ imprisonment; his junior colleague to nine months’ imprisonment. A year later a higher court reduced both sentences: Deltour’s to a six-month suspended sentence and a fine of €500 euros; Hallet’s to a €1,000 fine.

In January this year, the Appeal Court set aside Deltour’s convictions and agreed he should be retried in accordance with European Union laws that protect whistleblowers.

Antoine Deltour  received a custodial sentence, which was later reduced and then ultimately cleared.

Hallet was less fortunate: the appeal court found that the documents he leaked did not give him whistleblower status and upheld his €1,000 fine. In May the court delivered its final judgment: Deltour qualified as a legitimate whistleblower and was cleared of all charges.

The first companies to take the heat of the scandal were US coffee retailer Starbucks and Italian car-maker Fiat. The EU Commission found that Starbucks in the Netherlands and Fiat’s financing arm in Luxembourg used “artificial and complex methods” that “do not reflect economic reality” and thereby “unduly reduced” the taxes paid by the two companies.

EU Competition Commissioner Margrethe Vestager announced that tax rulings which “artificially reduce a company’s tax burden” were illegal because they were “not in line with EU state aid rules” and gave them an unfair competitive advantage.

The EU Commission ordered the Netherlands and Luxembourg to recover the illegal tax benefits from Starbucks and Fiat, respectively. The Commission estimated that each company could owe up to €30 million (R464m).

Next on the European Commission watchdog’s agenda for investigation was McDonalds.

Luxembourg’s Court of Cassation (court of last resort with scope of certifying questions of law and review in determining miscarriages of justice) rejected a verdict against former PwC employee Antoine Deltour, who in March had received a reduced six-month suspended jail sentence with a fine of €1,500 (R23,000) in the “LuxLeaks” scandal.

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