On April 13, 2021, the Danish State Prosecutor for Serious Economic and International Crime publicly named and charged 3 U.S. residents and 3 British residents with defrauding the Danish tax authorities of more than US$176 million in a sham trading scheme called “cum-ex” which is Latin meaning “with-without” that illustrates the vanishing of dividend payments. In summary, this dividend scheme is believed to involve the trading of company shares rapidly around a syndicate of banks, investors, and hedge funds to suggest numerous owners, each entitled to a tax rebate from the Danish Government which is fraudulent and patently illegal.
Earlier, in January of 2021, 2 UK citizens were charged in this illegal scheme that brings in a current total of 8 non-Danish individuals. Of course, additional investigations may well bring in substantially more suspected individuals. The illegal activity that all 8 individuals are being charged involved their submitting applications to the Danish Treasury on behalf of investors and companies from around the world to receive dividend tax refunds. If the Government’s case is proved the 8 defendants face up to eight years imprisonment for “gross fraud” if found. However, the State Prosecutor stated that they would be seeking an increase in the maximum penalty from 8 years to 12 years under a special section of the Danish law. In addition, the Danish Tax Agency has also launched civil cases against U.S. pension plans to recoup more of the money it has lost.
The reality is, as the State Prosecutor Per Fiig noted, “We do not expect them to voluntarily show up for criminal proceedings in which they risk being sentenced to so many years’ imprisonment. So we are working on all conceivable options to ensure that the defendants will be present for the upcoming trial.” If the U.S. individuals are U.S. citizens and/or Legal Residents of the U.S and now back in the United States, the State Prosecutor will be invoking Article 3(2) of the Agreement on Extradition between the United States of America and the European Union signed 25 June 2003, as to the application of the Treaty on Extradition between the United States of America and the Kingdom of Denmark signed 22 June 1972. Specifically, Articles 3 and 4(2) of the Annex to this Instrument governing shall the scope of extraditable offenses. Specifically, Article 3 considers an extraditable offense… “(c) in criminal cases relating to taxes…”
This author suggests, not a legal opinion by any means, that if the U.S. individuals still have these ill-gotten monies that the monies be returned to the Danish Government under an agreement of non-prosecution by their Attorney, probably both U.S. and Danish attorneys, to avoid a costly State prosecution in return for leniency in prison time, if any, and to help the Danish Government uncover others involved and/or become Government cooperatives to advise on stopping future thefts of this or similar methods.
The need for a U.S. Attorney representative will prove helpful upon entering the U.S. and being held pending determination of whether this crime will be prosecuted in the U.S. or Denmark and whether the U.S. individuals may already be wanted in the U.S. on other assertions of crimes. Oddly, the monies obtained illegally by the U.S. individuals must be reported on their U.S. Income Tax Returns and the failure to disclose and pay U.S. taxes will equate to tax evasion which carries a heavy prison sentence. Then, the U.S. individuals may find themselves being incarcerated in U.S. Federal Prison Systems and then, upon release, turned over to the Danish Authorities for a second prison sentence in Denmark.
By Michael B. Nelson, Esq.
April 14, 2021