December 12, 2011 / 3:18 PM / 6 years ago

German carbon trial prosecutor urges long sentences

* Prosecutor asks for sentences up to 8-1/2 years

* Criticises Deutsche Bank as well as German laws

* Deutsche Bank says no wrongdoing by its staff found

FRANKFURT, Dec 12 (Reuters) - A German prosecutor on Monday demanded jail terms of up to eight and a half years for six men on trial for fraud involving evasion of taxes on carbon permits, with a verdict possible as early as next week.

Investigations have unveiled an alleged conspiracy to evade more than 230 million euros ($331 million) in value-added tax (VAT) between September 2009 and April 2010.

Lead prosecutor Thomas Gonder called for the six accused, who worked at small firms, to be sentenced to jail for terms ranging from three years and nine months up to eight and a half years.

The trial focuses on a fraudulent practice called carousel trade in which buyers import carbon emissions permits in one EU country without paying VAT and sell them in another, adding tax to the price and pocketing the difference.

Gonder said the way Germany’s flagship lender, Deutsche Bank , set itself up for emissions trading left the door open for tax evasion.

Deutsche Bank said on Monday that independent legal experts had so far found no wrongdoing on the part of the bank’s employees. Bank staff have testified in the trial, and some continue to be investigated but none have been charged.

The trial started in August and a possible verdict on Dec. 21 has not been ruled out by the prosecution although it is not guaranteed.

Gonder also criticised German lawmakers and policymakers, noting that while there had been evidence of the carousel trade in 2009, a law change hindering the practice was only enacted in July 2010.

“Quicker action ...would have prevented tax losses of a three-digit-million-euro size to the treasury,” he said.

Carbon trading is a cap-and-trade system for carbon dioxide (CO2) emissions certificates. Transfers are recorded in national registries before being stored in an overall EU log called the CITL.

The EU carbon market, the bloc’s chief mechanism to curb greenhouse gas emissions and fight climate change, has suffered a series of scandals since its launch in 2005, including the theft and recycling of carbon credits.

$1 = 0.7482 euros Reporting by Alexander Huebner and Edward Taylor; writing by Edward Taylor and Vera Eckert; editing by Jason Neely

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