The European Public Prosecutor’s Office (EPPO) in Berlin, Germany, has brought charges against five individuals suspected of diesel and VAT-related fraud.
The defendants are suspected of defrauding €20 million in unpaid VAT, and two of them are also suspected of being members of a criminal organisation.
This is the first indictment in the investigation codenamed ‘Water into Wine’.
The defendants behind the fraud scheme are believed to have distributed so-called ‘designer fuels’, which are chemically modified products designed to evade taxation, using a complex chain of triangular transactions via several companies, in this case in Lithuania, Latvia, and Hungary.
Designer fuels
Based on the evidence, the designer fuels are entering the German market via Poland, falsely declared as lubricating oil.
Once the products reach Germany, they are allegedly relabelled and re-declared as diesel, to bypass energy taxes.
This tactic breaks the traceability of the supply chain and conceals the nature and origin of the products, according to EPPO.
One of the defendants, acting as the non-formal managing director of two oil distributing companies, was arrested in June last year.
Tax authorities had already seized assets worth €3.1 million at the two oil distributing companies in June 2024.
In total, it is estimated that the illicit activities of the criminal organisations behind the Water into Wine investigations caused a loss of €45 million in unpaid VAT and over €90 million in excise duties since 2023 to the detriment of the German budget.
Several of the suspected companies never paid either VAT or energy tax, EPPO said.
Investigation
The EPPO-led investigation was supported by tax investigation officers from Magdeburg, Bayreuth, Berlin, Potsdam, and customs investigation officers from Hannover/Magdeburg, Hamburg, and Munich.
If convicted, the defendants risk sentences of up to 10 year’s imprisonment.
The EPPO is the independent public prosecution office of the EU. It is responsible for investigating, prosecuting, and bringing to judgment crimes against the financial interests of the EU.
