Unlock the Publisher’s Digest for free
Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
The Danish tax authority on Monday accused trader Sanjay Shah’s hedge fund of masterminding a “meticulously planned” tax fraud, at the opening of a trial described by an English judge as one of the most complex to ever hit the courts in Denmark. London.
Lawyers for the Danish Tax and Customs Administration (SKAT) told the High Court that dozens of defendants led by Shah’s hedge fund, Solo Capital Partners, conducted a fraud over three years that netted them a total of of around £1.44 billion in dividend tax refunds.
The case is part of the vast “cum-ex” scandal in Europe, in which authorities in several countries say they were tricked into refunding withholding taxes on dividends that were never paid.
The civil case is being heard at the same time as Shah’s criminal trial in Denmark, which began last month after he was extradited from Dubai to face charges. Danish prosecutors said Shah, who is also a defendant in the High Court case, was the mastermind of a scheme that received more than 9 billion Danish kroner ($1.3 billion) in such refunds. He has denied any wrongdoing.
Investors based outside Denmark who hold shares in Danish companies are subject to a withholding tax of 27% on dividend payments and may claim a tax discount in some circumstances.
Skat claims that the defendants did not hold shares in the Danish companies and therefore their redemption requests in the period between 2012 and 2015 were illegal. The defendants include other traders and businesses, most of them low-profile.
Laurence Rabinowitz KC, representing Skat, told the High Court on Monday that the defendants “received no dividends from those companies, were not subject to tax in Denmark and did not suffer any withholding tax”.
He said the largest such scheme was “devised” by Shah’s fund, and the redemptions were “facilitated by meticulously pre-planned and coordinated trades, which were specifically designed not to involve any delivery of shares or cash in any time”.
Shah’s lawyers, led by Nigel Jones KC, said in written submissions that “the complexity of the trade does not demonstrate dishonesty”. Shah “had a positive and honest belief that the operations were valid,” they added.
The civil proceedings in London follow a long legal battle over jurisdiction. The UK Supreme Court rejected Solo’s attempt to block the ongoing case in England last year, setting the stage for the High Court trial.
The case was described by a judge at an earlier stage in the proceedings as “one of the largest and most complex disputes to be heard in the Commercial Court”. According to Shah’s legal team, Skat has submitted documents totaling approximately 250,000 pages to the court.
Shah faces up to 12 years in prison in Denmark if found guilty in that criminal case. He told a Danish court last month that his hedge fund simply exploited a legal loophole and did nothing wrong.
“It was like a ballet,” he said of the coordinated trading his company and others engaged in to get his tax refund.
Two former British employees of Shah’s fund, Anthony Patterson and Guenther Klar, were sentenced to prison terms of eight and six years respectively by Danish courts earlier this year for their roles in the scheme.