VAT fraud by the Calabrian mafia

Beschklagnahmte Luxusautos. Bild: Polizei

There has been a lot of talk in recent months about dubious share deals in which transnationally operating networks with the participation of banks and large law firms under the heading CumEx and CumCum succeeded over many years in having capital gains taxes refunded to them that had not previously been paid at all. The damage caused to the treasury in Germany alone amounts to over 20 billion euros. A police operation at the end of October 2021 has now shown that a tax fraud scheme is also being practiced by clans of the Italian ‘ndrangheta, which is smaller in terms of the volume of damage but similar in terms of its execution and criminal energy. Here, too, the criminals operate across national borders and have the tax offices pay them sales tax that they had never paid. In the latest police action, arrests have now been made in Italy, Germany and Bulgaria, and a whole series of luxury cars have also been seized: a total of 42 cars, in Kösching in the district of Eichstätt there were five cars, including Lamborghini sports cars. The investigation focused on several representatives of the Pelle families living in Germany.

For a good year and a half, Ingolstadt police had been investigating the matter under the aegis of the Munich field office of the European Public Prosecutor’s Office (EPPO). The office only began work on June 1 of this year. However, it is not a superordinate European authority, but can only act in certain cases. It has been set up to prosecute criminal offenses involving a financial loss to the European Union that exceed 10 million euros. This is the case with VAT carousels.

The Bavarian investigation led to arrests in Bavaria in October, including four suspected members of the ‘ndrangheta being taken away by police in Bavaria. The men are accused of making around 13 million euros in profits via fictitious vehicle sales between Italy (Milan) and Germany and related refunds of sales taxes that were allegedly paid but never actually flowed. Car dealers in Eichstätt and Milan organized the deals. The money was then transferred abroad. House searches were also carried out elsewhere in Bavaria, for example in Upper Bavaria in the districts of Eichstätt (five searches) and Ebersberg (four), as well as in Ingolstadt, Pfaffenhofen an der Ilm, Munich, in Central Franconia and in the Upper Palatinate. In addition to the EPPO office in Munich, the police headquarters of Upper Bavaria North and the Augsburg tax investigation department were involved. Italian publications speak of car dealerships in Kösching, Eichstätt, Windsbach and Hohenlinden. According to the search warrant, international trading partners are said to be based in Belgium, France, Bulgaria, Portugal and, of course, Italy.

According to media reports, additional indications of drug trafficking emerged in the course of the investigation. More detailed information on those arrested is provided by Italian media: Sebastiano and Giuseppe Pelle (1991) from the ‘ndrangheta families of the same name are said to have lived in Germany and to be among those arrested. Sebastiano Pelle is accused primarily of sales tax fraud, while Giuseppe Pelle is considered by Italian investigators to be a supplier of hashish for the Barbaro-Papalia clan.

The Pelle family gained sad notoriety in Germany due to their involvement in the Faida of San Luca, a confrontation between two hostile groups: on one side the Pelle-Vottari families, on the other the Nirta-Strangio families. In Duisburg, in August 2007, there was an attack by the Nirta-Strangio on the Pelle-Vottari. After celebrating the admission of a young mafioso into the Pelle-Vottari family at the Da Bruno restaurant in Duisburg, near the main train station, representatives of the opposing group waited outside the establishment and shot the six participants in the mafia ritual. For the ‘ndrangheta, this was a turning point as far as its foreign activities were concerned. It created precautions to prevent such bloody clashes abroad in the future. For example, a committee with representatives of the most important families in Germany settles disputes. Violent acts of the kind that occur more frequently in Italy should not happen abroad, so as not to attract the interest of the security authorities and to be able to continue to do business inconspicuously.

Several investigations show that Italian organized crime practices sales tax fraud. As recently as January 2020, a case in Milan documented a case of fraud in the telecommunications sector involving voice over IP units. Involved here, among others, was the ‘ndrangheta clan Bruzzaniti. Another investigation in Italy, in Reggio Emilia, also refers to Bavaria, namely Augsburg. The Innocenti family was at the center of the case, entitled Billions, which was concluded in 2018 with arrests; the accusation here was of false invoices amounting to several million. The organizers had set up a complex network of companies with front men, but the goal here was not only tax fraud, but also money laundering and tax evasion, among other things. It is striking that the ‘ndrangheta is increasingly able to operate across borders and move profits across continents.

Sales tax fraud in the hospitality sector is a recurring phenomenon. In 2019, two Germans originating from Hong Kong had to stand trial in the Osnabrück Regional Court for selling manipulated cash register systems to Asian restaurants. The restaurateurs were able to delete sales from the electronic cash book without the tax office noticing. Tax investigators, however, went to sample meals at the establishment and found that their orders did not show up later. The two men allegedly distributed a total of 2600 such cash register systems.

In 2021 a similar supplier from Italy flew up, which is to have sold 300 Gastwirten its cash solution. Here, too, sales made “disappeared” as if by magic, so that the businesses had to pay less tax. Europol had coordinated the operation. There were 93 house searches, and 23 people are under investigation.