Published by Global Banking and Finance Review
Posted on February 10, 2025
By Jonathan Stempel
NEW YORK (Reuters) -A Manhattan federal jury awarded Denmark's tax authority $500 million on Monday, in the first U.S. civil trial concerning the country's effort to recoup $2.1 billion of tax refunds it claims were obtained through fraud, the authority's lawyers said.
Jurors sided with SKAT, the Danish equivalent of the U.S. Internal Revenue Service, in the so-called bellwether trial against four individuals and 17 pension plans they oversaw.
The trial arose from complex arbitrage transactions known as "cum-ex" trades whose accused mastermind, British hedge fund trader Sanjay Shah, was sentenced by a Danish court in December to 12 years in prison after being found guilty of fraud.
Danish law lets the government withhold taxes when companies pay dividends, and allows some shareholders to seek refunds.
SKAT has said dozens of pension plans and limited liability companies used the illegal trading strategy between 2012 and 2015 to make it falsely appear they bought tens of billions of dollars of Danish companies' stock, and then claimed tax refunds on dividends they never received.
The tax authority accused Shah and his company Solo Capital of taking a large cut of the profits, court papers show.
Jurors deliberated over two days before reaching a verdict in the five-week trial. SKAT is short for Skatteforvaltningen.
Lawyers for the pension plan defendants did not immediately respond to requests for comment.
Neil Oxford, a Hughes Hubbard & Reed partner representing SKAT, called the verdict a significant step in SKAT's efforts in the United States, Denmark, Canada, Dubai, England, Malaysia, the Netherlands and elsewhere to recover "stolen" funds.
During closing arguments, Sharon McCarthy, a lawyer for some defendants, accused SKAT of "complete and utter negligence" in handling refund claims, and offering "absolutely zero evidence" that pension plans knew Solo was not buying Danish shares.
Marc Weinstein, another lawyer for SKAT, countered in his closing argument that "the defendants blew through stop sign after stop sign, red flag after red flag," and "knew their plans couldn't and didn't buy all that stock."
The case is In re SKAT Tax Refund Scheme Litigation, U.S. District Court, Southern District of New York, No. 18-md-02865.
(Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis and Stephen Coates)
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