Here’s why Macquarie (ASX:MQG) is making news for all the wrong reasons

Here’s why Macquarie has some dark clouds hanging over its head today…

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The Macquarie Group Ltd (ASX: MQG) share price hasn’t been able to escape the market pain on Monday. Although, the investment bank’s woes go further than the concerns of the latest COVID-19 variant — Omicron.

At the time of writing, shares in the investment bank are swapping hands for $193.81, down 0.75%. This places the company’s shares 6.9% below its 52-week high, which was set only a couple of weeks ago.

Australia’s biggest investment bank is now caught in the middle of a bombshell tax investigation involving the exploitation of a German tax loophole. The scandal is believed to have cheated the German government out of $80 billion in taxes.

Unwanted attention on ASX-listed Macquarie

News of Macquarie’s involvement in the overseas tax scandal hit the headlines last week. The findings were published following a joint investigation between the ABC and journalists at German-based Correctiv.

The blowback on Macquarie shares could be seen by the end of Friday’s session. One of the biggest names on the ASX fell by 3.2% amid the reports surfaced by ABC News. While the weekend provided shareholders with the chance to digest the controversial actions, it also came with a 40-minute long story broadcasted by the ABC on Sunday.

During the segment, ABC reporter Mario Christodoulou discussed the scandal with criminologist and senior lecturer at Macquarie University, Alex Simpson. Regarding the legality of Macquarie Group’s alleged actions, Simpson said:

There is a deliberate strategy about trying to kind of confuse the tax authorities using this trick to make shares disappear and then reappear either side of this moment in time when the record is set.

In essence, Simpson’s assertion is that while the black and white of the legal system might not define ASX-listed Macquarie’s lending to the cum-ex trading scheme as illegal, it is exploitive of the German taxpayer.

Perhaps the most peculiar information that has been shared is Macquarie’s own internal deliberation on the facilitation of the practice. While the investment bank suggests they were of the belief that their actions were legal, there were doubts.

According to reports, one senior executive at Macquarie cast unease on what was occurring in 2010, writing:

It is a bit strange that we are financing trades that we cannot get comfortable with to do ourselves

Shares in ASX-listed Macquarie have been under pressure since these revelations. However, the Macquarie share price remains 38% above where it was at the beginning of the year.

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Motley Fool contributor Mitchell Lawler owns shares of Macquarie Group Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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