Anna Hartz
US court upholds $476 million judgment in Danish tax fraud case
Financial fraud can take years to uncover, especially when it involves complex trades and large sums of money. One of Denmark’s biggest tax cases has now reached another major point in the United States.
Massive dividend tax scandal
Two American businessmen, Richard Markowitz and John van Merkensteijn, and their wives have been ordered to pay $476 million to Danish tax authorities, reports DR.
A New York appeals court upheld the ruling from the lower court. The case is linked to the massive Danish dividend tax scandal, which authorities say cost the state 12.7 billion kroner between 2012 and 2015.
According to the court ruling, Markowitz and van Merkensteijn and companies linked to them claimed on paper to have traded 10 percent of all Novo Nordisk shares in March 2013. They did not actually own any Novo Nordisk shares.
The court said the trades were based on fictitious accounting entries. No shares existed and no money was moved inside or outside the trading platform used by British fraudster Sanjay Shah.
The two Americans were not charged with a criminal offense. Danish tax authorities instead sued them in the United States, claiming they helped create a system that allowed billions of kroner to be taken from the Danish treasury.
Eight-year long legal battle
Markowitz had previously worked as an executive at Goldman Sachs. Van Merkensteijn worked as a tax lawyer for decades. Both later became involved with Shah and his company, Solo Capital.
The companies they established included small American pension funds that were exempt from Danish dividend tax. By claiming to own large amounts of Danish shares, the companies were able to receive billions in tax refunds.
Shah was convicted in Denmark and sentenced to 12 years in prison. He has appealed the sentence.
Markowitz and van Merkensteijn argued that they believed the shares had actually been bought and held by Solo Capital. The court rejected that explanation.
They also argued that US courts could not handle another country’s tax claims under a legal principle known as the Revenue Rule. The appeals court rejected this argument, saying the case involved fraud rather than ordinary tax collection.
The ruling is the latest step in an eight-year legal battle. The two men can still ask the US Supreme Court to review the case, but the court decides which appeals it will accept.
