Thank you an astoundingly clear explanation of a crazy-complicated financial story. This is why I go out every day to find my NYT!
19
The District of Columbia had a similar tax refund system in place about 5 or 10 years ago. It involved an insider and the loss, per my memory, was about $43M. The wrong-doer issued the checks to friends who had businesses through which the checks were deposited. I think he or she ran out of friends with businesses and issued a large check to some individual who tried to deposit it in his or her personal account, whereupon the bank called authorities.
5
Geez, I hope Trump doesn't get wind of Sanjay Shah, he'll be after him to become the next Treasury Secretary, as soon as he can get rid of Mnuchin.
25
Greed has no boundary. Unless there is strict and appropiate punishment for white collar criminals financial frauds will continue .
17
1. The Australian Tax Office is now giving refund cheques for taxes never paid, particularly to landlords.
This seems to be the new international way of handling taxes.
I'm surprised it became public.
2. In a world where people can be renditioned here, there & everywhere, just how hard would it be to snatch him? Private plane in & out. Easy.
My guess is the Danes don't want Shah back. Too embarrassing.
6
Denmark has problems like most nations. The US has lots of arms merchants and blood money oil thugs as well as corrupt internationals from China, Ukraine and more. They pay no taxes while they broker deals in NY, London, Paris and on and on.
11
This scheme may have continued unabated for a long time if the Shah network had been less greedy. Still, Shah is free and can’t be extradited it appears despite over $600 million in frozen assets out nearly $2 billion. Crime pays, it appears.
6
Helm yeah crime pays. Ask Trump and the GOP.
18
Well done to the whistle blower!
The European Banking Authority is moving to the continent post Brexit, expect more of this!
5
This is what happens when you set up a complicated system and have not very bright people trying to run it. If the Danes had shelled out the money to have an expert team of accountants and lawyers run their agency, this probably would not have happened.
Of course, if the IRS hadn't been asleep at the switch when Mr. Trump's dad was doing all his tax evasion, maybe things would have been different here too.
25
@Michael Skadden Yeah, talk about collusion. And those time-variable valuations for real property around the city point to more dubious due diligence by public employees. Trump sure knows how to bribe the key people.
10
Part of the GOP agenda is to starve the IRS so it can't combat the rich getting richer through tax fraud. MAGA.
20
No one significant from the mortgage crisis melt down went to jail, only a small community Bank called Abacus in Manhattan Chinatown was indicted but found innocent, and the mortgage generated in that bank had close to zero default rate. At least in authoritarian China, if you are found guilty stealing that kind of money, be prepared for life sentence or a bullet in the head.
15
This is a great piece of reporting. The only American who profited from this criminal activity is Mr Hanamarian. He clearly must have known that he was the mouthpiece of Mr Shah as he was somehow "independently" representing most of his US based minions. I would suggest that the NY times, the SEC, and the Danish government focus on his potentially questionable relation with this fraudster.
10
The grandaddy fraud is the Progressive Project. AKA: The Primacy of Authority.
When you place government at the root of world economic engine,
– instead of free people exchanging value – why are you surprised when you attract rats?
3
Because Bernie Madoff, Jamie Dimond, and all those folks paying the rating agencies to bulk up their portfolios to defraud investors and precipitate the collapse of mortgage markets are so much more honest than those faceless bureaucrats. And we don't need no stinkin' EPA mucking up our right to reap private profits from the public trust.
Ain't unfettered capitalism just grand?
19
Progressives unleashed the dogs.
They debauched money and created the regulatory state. This destroyed the acid-wash of hard money, allowing the rats to game reality.
Serves the Danes right for harboring terrorists like Kim Peter Davy. I'm glad they're being hurt where it hurts - in the pocket.
7
I hope that this fraud is fully prosecuted and that the perpetrators and beneficiaries are imprisoned, and the ill-gotten gains are recovered. Stealing from the public is a popular activity among thieves.
11
@Shillingfarmer Also, presidents even.
8
The story is shocking, as is the author's penchant for diminishing Denmark by comparing its institutions to those from other nations in a fashion that is truly bizarre. SKAT is not what the I.R.S. is called in Denmark. DR is not "Denmark's version of the BBC." Are there any editors left on staff at the Times?
6
@NT
From wikipedia: "SKAT (lit. Tax) was the name of the Danish tax authority. It is the state authority under which the Danish Treasury calculates and collects taxes and levies charges. The authority also undertakes property valuation and settlement of debts. "
From wikipedia: "The IRS is responsible for collecting taxes and administering the Internal Revenue Code, the main body of federal statutory tax law of the United States. The duties of the IRS include providing tax assistance to taxpayers and pursuing and resolving instances of erroneous or fraudulent tax filings. The IRS has also overseen various benefits programs, and enforces portions of the Affordable Care Act.[4]"
Tax collecting seems common to both.
------------------------
From wikipedia: DR (Danmarks Radio),[1][2] officially Danish Broadcasting Corporation in English,[3] is a Danish public-service radio and television broadcasting company.[4] Founded in 1925 as a public-service organization, it is Denmark's oldest and largest electronic media enterprise.
----------------------------
NYT editors seem to be working just fine.
13
One can even see a listing of some of the (alleged) fraudulent Danish tax refunds paid on the website of a consultancy firm used by Syntax GIS:
https://nakedcreativity.co.uk/work/syntax-gis/
1
White collar crime is never punished.
9
@Stephen "White collar crime" is now America's raison d'être.
13
I had said earlier this man or his family is from an Indian state called Gujarat. It's the same state from where the current prime minster hails.
And these so called Gujaratis seem to outnumber any other class of Indians in these financial crimes.
I should have mentioned one more thing.
In their language, Gujarati - they greet each other by saying "Kem Cho" - meaning how are you?
In India today, it has been altered to say "scam Cho?"
2
An example of 'the pen is mightier than the sword'.
And reminds one of Dylan's lyrics about how some people rob you with a fountain pen.
It used to be that great wealth used to concentrate upon horse racing, now it is all about legal litigation, LLCs, offshore accounts and tax loop holes. What money isn't dirty or laundered today?
5
Several comments here have pointed out the absurdity of having a single employee in SKAT having the authority to approve billions of dollars in refunds. The more troubling thing here is that they had no database of account holders. Without a mechanism to verify that the applicant actually owns stock in the amount claimed, even 10 employees could not have prevented fraud. It is crazy to have a system of refunds that cannot be verified. Kind of like our own IRS and its apparent inability to prevent fraudulent refund claims on personal income taxes.
11
@Scott Werden - The beneficial owners of stock are not easy to determine nowadays, as the bulk of stock shares are held in street name.
2
@Scott Werden I wonder if any of this fraud is a result of a "starve the beast" effort in Danish politics where tax collection agencies are chronically under-funded in order to encourage tax cheating. Sort of what our congress is attempting.
10
"One would place an order to short a chunk of shares of Danish stock — essentially, a promise to buy the shares once they dipped below a certain price."
That's not what a short is. Has the author ever traded stocks or options? I would expect better from the NY Times.
If you really wanted to be able to buy a stock once it dipped below a certain price, you would sell out-of the-money puts. That would give you the right, but not the obligation, to buy at a specific price.
5
No way this scheme succeeds without the full complicity of Mr. Nielsen. And shame on his superiors at SKAT for allowing him to act with no controls, no oversight, no audit. Pathetic.
12
They "lost" it in a Trump casino, on one hand of blackjack at a table where an orange-haired dealer was working the shoe. They had a 21, but the dealer had a 22, which he claimed was one better.
12
Can you imagine the USA going after fraudulent tax evaders like this? Never in a million years.
Got hand it to the Danes for exposing and going after him! The best of luck. I hope they retrieve the funds!
11
@Issy Yeah, in the USA we elect them to high office.
4
Interestingly, in the 3rd video, Sanjay Shah opines very positively about our beloved President, Donald Trump. I can only guess, that correspondingly with our President's expressed antipathy towards the Special Council Robert Mueller, Sanjay Shah feels resentment towards the European investigators attempting toreveal truth about him.
I therefore raise the question: is this correspondence entirely coincidental?
5
Multiply this by a million, add in the even larger operations that are legal but rely on corruptly gained loopholes like the carried-interest rule, and throw in the massive laundering of criminal networks, fraud schemes and blood money, and lean on corrupt government cronies, and you have the spider network of gangster capitalism around the world, headquartered in any number of financial centers and chiefly on Wall Street and in the City. This is the kleptocracy that Trump and his allies serve.
11
What about the massive failure of the American media and IT industries to comply with Chapter 3 withholding? It’s part of the same Tax Treaty System. You get a w8 from the software vendor, withhold, send in eftps, then send a 1042 at year end. Easy. Just don’t try to say it if you work for a company. I’ve had auditors from Deloitte laugh at me when I’ve tried to advocate tax law compliance.
6
Reading this article is depressing, since all of this fraud that so outrages Denmark is essentially common practice in the USA. How many billions have been stolen from America?
15
And the top guy at Interpol has disappeared. I think he was headed to China. Follow the money.
5
Fraud of this sort tends to occur because some people are dishonest and lacking in empathy and they see a way of gaming a large system. It happens all over, and it is committed by people of every sort of background. It's a logical fallacy to use this particular example to arrive at nationalistic or racist conclusions. In the U.S., for instance, Medicare fraud costs us at least 50 billion dollars a year. So there's something rotten in the U.S., too.
5
For two years, in the mid-90s, I lived and worked in Denmark. Danish system of taxation is absolutely obscene. A single mother of two at the time, I brought home 38% of every kroner I made. That was w/ the prices (massive taxes accounted for) on good and services 3-5 times above those we enjoy in the States. The lovers of the Danish-style socialism have no idea (NO IDEA!) what they are asking for.
7
There shouldn't be a tax on dividends to begin with. No tax, no crime.
@Jon Harrison
The problem is not that there is a tax on a dividend, it is that there is an automatic withholding of the tax. Apparently they don't trust their citizens to pay their taxes at the end of the year.
4
One take away for policy makers is that whenever possible governments should avoid collecting money that will be refunded. These always create an opportunity for fraud.
The basic instinct of those designing any tax or fee-paying system is to err on the side of collecting too much and then refund the excess, but it is much safer to err on the side of collecting too little and then chase those who owe more.
2
It is quite expensive to chase those that don’t pay. Easier to automatically collect and refund the anomalies.
7
@Victor But, did they ever actually collect any money? The trades were bogus and never carried out. These fraudsters would never pay taxes in a scheme to steal them back.
1
When the tax authorities are treated like dirt, abused, underpaid, overworked, then tax collections plummet. Fewer audits, fewer talented people to audit and collect from wealthy people (like Trump), and the whole country takes an economic beating. The IRS is collapsing slowly, starved of cash to update systems , starved of talent to audit and collect, and the deficit is going through the roof.
It's not complicated. Like Leona Helmsley said, " Only the little people pay taxes." because the rich people have crafty tax lawyers and accountants to help them defeat a crippled IRS.
48
Wow! I have a measly 43 shares of Nestle SA stock and the Swiss government grabs 35% of the annual dividend as tax. I have to download a Swiss tax form (in English, yay!), fill it in, have it translated into Japanese so my local tax office will agree to put an official stamp on it, and finally send it in, all in order to get 25 of the 35% back. I have to do this every year to get back $25. Last year, it only took 4 months to get the $25. This year the Swiss still haven't paid even though I filed in April. I recently sent an email to ask whether the form was lost in the mail. Nope, it was right here on the desk, I was told. They would get to it when they get to it. This article explains why they might be taking so long.
29
@Stuart M. I admire the effort you make to get your double-taxed money back. And that explains why the Danish tax office, and indeed, even the Social Democrats in Denmark don't want to make a big deal out of this. They are charging 30% tax on dividends just in case the taxpayer is subject to Danish capital gains tax, in spite of the foreign address. I overlooked it myself until the local tax office cut my tax write-off to the 15% allowed under the tax treaty. The Danes (and the Swiss) know that most people either won't notice, or they won't bother to file for the paltry sums involved, but in sum, it probably dwarfs the money the scheme got from them. The U.S. does the same thing with alien withholding.
8
@Stuart M. Sell the Nestle , problem solved
5
@Stuart M. If you file a USA Form 1040, the line on the back page allows to to declare your paid foreign tax to be deducted from your income tax. You don't pay US income tax, you say? What are you complaining about?
So something really is rotten in Denmark.
20
@Mark Andrew, Indeed! In the other great scandal mentioned in the article, the money laundering scandal by Danske Bank, which is not only Denmark's biggest ever, but possibly the largest money laundering scandal in world history(!), all that has come out of it so far, is that the CEO of Danske Bank has made off with about 2 million dollars. He wasn't even booted out -- he left by his own desicion. When I go to my local supermarket, I usually go by a back alley behind the store toward which a small windowed office faces. Sometimes a police car is parked next to it and in the office you can see the police officer, the store manager and a shoplifter, sometimes an elderly person probably with little money. So there you have a swift direct consequence, but only for the little people. With the CEO of Danske Bank, with Mr. Shah and their political enablers nothing happens! It really is infuriating!
10
Socialism being "tried" again, I see, Well, as they in Russia, "at least we still have the land." Good thing it's tied down. If it wasn't, they'd all be out to sea. NEXT---
2
Well, thanks to capitalism and global warming, most of Denmark will be underwater in 100 years.
2
Haha!
Sanjay Shah and Flo Rida - sounds like a perfect pair.
Cultural devotion and prayers to Lakshmi are crucial to understanding Sanjay's and other similar people's behavior.
3
@JakeThere are close to 1 billion people who offer "prayers to Lakshmi". Exactly what "understanding" have you gleaned of each of their behaviors.
There are crooks and fraud in every country and culture, this guy happens to be a British national from an Indian family that had emigrated to Kenya. A pretty complicated history to be generalizing about sitting in Texas.
8
It's really amazing how corrupt London has become - especially it's so called City - a haven for banksters.
Add to this mix a man with Indian heritage and from the area where the current prime minister of India hails from. These folks known as Gujratis after the state Gujarat where they hail from.
Of all financial scams in India - a majority of these fraudsters are from that state or heritage of that state.
What's most amazing is Britain appears to have done nothing to apprehend it's own national or help the Danes other than the first tip.
But that's par for the course.
Britain which is not great anymore is also a safe haven for Russian thieves who have laundered money through these banksters in the City.
There is something rotten with Britain these days.
19
@Neil
The article was clear: Shah was born in London. His parents emigrated from Kenya. Making an insinuation based on Shah's ancestral heritage is as troubling and offensive as making an insinuation about the heritage itself (or an unrelated politician who may also share that heritage).
23
@blanket
Why is it offensive?
There a ton of Gujaratis with the last name Shah been implicated in numerous financial scams all over the world, be it India, Singapore, New York, Hong Kong, London.
Dubai the new money laundering capital.
9
@DC it always has been the money laundering capital. The 9/11 terrorists were all paid out of Dubai and this subsequent detail was conveniently hushed up.
Dubai is at the epicentre of terrorism financing because of lax controls and flamboyant money being generated locally to pay bills.
4
Let me say it again in case the article didn't repeat it enough "LONDON BORN".
3
"A tiny department in SKAT, run by one man, approved thousands of applications for refunds."
Anyone else see a problem with this? One man in charge of approving the US equivalent of $110 Billion in tax refunds. What? Did the Danish government take idiot lessons from US corporations in running 'lean and mean'? And stupid? No checks and balances? This was ripe fruit ready to be picked.
22
If you’re increasing the sum to fit the US you ought to increase the manpower proportionally.
1
What's the problem ?
The then A.G. Eric Holder made an agreement with HSBC , a bank that provided financial and money laundering services, imposing a fine but avoiding criminal charges to the bank's executives.
"Former Attorney General Eric Holder overruled Department of Justice (DOJ) lawyers who said British banking giant HSBC should be prosecuted for missing hundreds of millions of dollars in money laundering by drug cartels, a congressional committee report said Monday."
"The report also stated the overruled DOJ lawyers recommended that charges be filed against HSBC Bank for allowing financial transactions with Cuba, Iran, Libya, Sudan and Burma, countries then-under U.S. sanctions."
"Then-Attorney General Eric Holder and his senior staff allowed HSBC to settle over the bank’s money laundering oversight failures rather than face criminal charges. They then “misled” Congress as to why the DOJ failed to prosecute HSBC, according to the majority staff of the House Committee on Financial Services."
12
There is a troubling pattern to this, though: HSBC was long known to a troubadour in global compliance arising from its buckaneering days in Shanghai and later, Hong Kong. Due comeuppance. But the US deludes itself that it is clean - no-name Nevada and Delaware companies; bearer bond certificates...there is no end to the scams. Trump’s scams are just part of the long history.
The authorities are usually not dumb (well, maybe the Danes were) but there is no appetite by the politicians to really really go after this stuff.
Ask yourselves: if 277 “trades” were done by 17 “self-managed retirement funds”, how many other lawyers, accountants and financial planners do you think were in on this?
Only the little people pay taxes indeed!
8
Behind every great fortune is a great crime. - Balzac
24
This is an astonishing story. The Danish tax authorities sound completely incompetent. One guy was able to give out 2 billion dollars with no oversight?
We have entered a new era. Not only are your tax dollars going to waste--they are now being given away to scam artists.
17
Although this happened in Denmark, this is another reminder that while we're all glued to the reality show at the top of our government, the complicated and often mind-numbingly boring government activities that are critical to the function of society are being carried out, or neglected, out of the public eye and sometimes not in the public interest. People worry about being robbed at gunpoint, but spreadsheets are more dangerous.
48
Trump just found his next secretary of the US treasury.
82
Only 2 billion? A quick search turned up articles that estimated the IRS has paid out tens of billions of dollars involving tax identity theft fraud (where scamsters simply filed fraudulent tax returns).
22
To this layman, it's hard to see the difference between this swindle and what passes for finance these days. More brazen, maybe?
18
The concept of world government is looking better and better. Let’s have the Scandinavians run it. They seem duly cognizant of the common good, and not predisposed to greed. Every week there is news of tax evasion and fraud around the world. Russians looting their country’s wealth and buying floors in Trump buildings. Tax fraud con man becomes president. Meanwhile industrialists poison our water and kill the bees while putting their names on opera houses. Scandinavian style socialism for the whole world, the time has come, before the greedy bespoil it for all.
45
@Fred Weidenhammer I note your irony, Denmark being a Scandinavian country. Alas, greed is global. The only way to fight it is with transparency and democracy. And the fight never stops. The interesting thing here, is Sven Nielsen who apparently approved all of these tax abatements for nothing - or a few hundred thousand kroner in an unrelated scam. While the people he was helping made off with billions. He must have known he was sitting on a gold mine, but he didn't cash in. Donald Trump would call him a sucker.
2
@Fred Weidenhammer so we can truly institutionalize greed and corruption without any accountability?
... this just reminds me of the fact that
germany's [relatively] new finance minister appointed
a former goldman sachs CEO as his 'right hand man'
[or as his 'advisor' to paraphrase the fact more politely].
call me biased BUT i can't help anticipating that a number of
new "loopholes" will be written into german financial legislation
from now on.
in another case, a german politician sent tax investigators
straight to the insane asylum bc they had come too close
to revealing tax fraud in very high places.
"creative accounting" is one of the most devastating plagues
and, alas, too many humans are too weak to resist its [c]harms!
20
The problem with honesty be it dreadful Scots or Danish is you tend not to see these other, conniving sorts of people coming, it never occurs to you that this sort of person is in your country much less right next door, even if only figuratively.
Danes tend to be remarkably honest and truthful. That is why someone with a clever agenda could put one over on them in a major way. With their high taxes, inborn thrift, and a supportive social system they have the one asset any crook really wants, valuta contente, or as we call it cold, hard cash.
Sadly, the result of this most likely will be a mental closing of doors against outsiders of different habit, language, and color. As a nation they still will be honest but more likely to reflect the peculiar idea that I once heard stated "people with brown eyes tell lies."
20
As a financial professional, I find this a failure on multiple levels.
The stock was never owned, so a dividend was never paid and thus tax never withheld. There was no withholding tax to reclaim, which easily would have been verifiable should anyone have decided to check.
Also, a trade confirmation should not be taken as evidence of ownership in a stock. The activity posted to your broker's reporting system is not considered the official books and records. Only your account statement, issued monthly, is considered the true record of activity in the account and record of securities and cash owned. This is the only proof and should have been required to receive the tax reclaim.
Additionally, with the volume of tax reclaims being processed at SKAT, it's shocking that there was no one reviewing the approvals. A robust due diligence and compliance team is required in all industries, public and private, which deal with the movement of large sums of money. Even when I worked a part-time job, we had three people counting the same register, the cashier and two managers, before sign-off for a bank drop off.
There were so many ways this should have been caught and Shah's claim that it was a loophole is laughable. It's pure fraud on Shah's part and pure negligence on the part of the Danish tax authority.
103
@Dottie As a member of an extended family that was was robbed by Madoff there were numerous times during his scam should have been uncovered. Having his company's compliance officer be his niece was as dopey as many of the actions of SKAT which of course verifying that he actually held the securities that he claimed to manage.
19
I would imagine that the transactions that involved US pension funds will now be investigated by the IRS.
11
@Barry Short not likly. the "IRS HAS HIGHLIGHTED THAT
DECLINING RESOURCES HAVE CONTRIBUTED TO UNFAVORABLE TRENDS IN SEVERAL KEY CRIMINAL
INVESTIGATION BUSINESS RESULTS.
Highlights Final Report issued on September 13, 2017
Highlights of Reference Number: 2017-30-073
to the Internal Revenue Service Chief, Criminal
Investigation."
13
I'm getting.tired of hearing about criminals living in Dubai , which apparently has no extradition arrangements. If a country won't play by Western rules about financial crimes and hand over those in need of trial in Western countries then maybe the Dubai banking system, it's aviation aggreement to to have flights originate in Western capitols.and a host of other entitlements , should be removed from the world banking system. It's sounding quite a bit like a rogue nation. A guy steals over 2 billion from Western nations and gets to hide out in luxury. He really needs to be in leg irons and herded onto a flight first to Germany. Just because a taxation system is antiquated and poorly run does in no way reduce the crime.
111
@Mrf
But, but....
Extradition agreements are always bilateral.
Would you really want US citizens extradited to face justice in a Middle Eastern country?
11
@Mrf "Sanjay Shah is preoccupied with his own troubles. In mid-September, a High Court of Justice judge in London entered a $1.3 billion default judgment against Solo Capital and a company it owned, Elysium Global, in a case filed by SKAT alleging fraud. Mr. Shah’s spokesman said his client didn’t respond to the lawsuit because both companies are now controlled by liquidators.
He also said that at the prodding of Danish officials, Britain, Germany and the United Arab Emirates have all frozen, though not confiscated, $660 million in assets belonging to Mr. Shah. The financial pinch is enough that Mr. Shah has been forced to put his house up for sale, the publicist added. Out of caution, the publicist said, Mr. Shah does not travel.
Fears of arrest and extradition are justified, said Henning Sorensen, an associate law professor at the University of Southern Denmark.
“Shah is free as long as he stays in Dubai,” he said. “He is like a bird living in a golden cage.”
9
@nolongaradoc
Then this is a case for the Impossible Missions team. In such a matter, I would not desire to be Mr. Shah as it's "Never over till they say it's over..."
Best to just go to the American Embassy and turn yourself in now and then work with the Danes and Americans to clear this can of worms all up, very quickly or...hmmm.....
I've seen estimates that somewhere between $20 and $30 TRILLION is currently hidden from taxes in offshore accounts worldwide and I would be highly surprised if these estimates are anywhere near the actual amounts. Banks thrive on helping their wealthiest clients do this. One bank has been caught multiple times helping launder money for known drug runners. A Swiss bank exec. was caught helping his client smuggle diamonds into the US in toothpaste tubes so they could repatriate cash. The Panama Papers revealed thousands of shell corporations used to hide money. And when all is said and done, some of that money goes to political institutions to make sure the system keeps them well protected from public scrutiny. It's called "free speech."
60
@Dweb - That fellow who had 44 overseas pension accounts....could he have been gaming the system?
Can you imagine giving the money away as a tax refund just based on a filled form and never checking to see that tax was ever paid in the first place?
They should feel lucky that it was only two billions.
34
@DM This is precisely what tax fraudsters do if they get hold of your social security number. They file for a refund (under a different address, of course) and the IRS dutifully pays the refund. The IRS has no time or humanpower to verify anything. Then when YOU go to file your own tax return, the IRS sends you threatening letters, telling you you have already filed.
8
Can someone explain to me whether there were actual legitimate pension funds involved? If so, did they benefit from this fraud? And are they in any legal or financial danger because of it?
4
@Lisa M. - These 'pension funds' were IRAs owned by individuals. Why US citizens would have dozens of IRAs in places like Luxembourg and Switzerland is an interesting question.
2
First Den Danske now this? Time to be a little less smug?
4
The defense that it was a "loophole" doesn't hold at all.
Even in the broadest view, beneficial ownership was never transferred between these accounts, so arguing that there was an entitlement to a tax refund is laughable. You also add in that presumably you cannot request a refund on the same shares during the same tax year, which presumably they must've done, and its clearly fraud.
Getting something for nothing is the definition of fraud. And at some Interpol will get this guy.
26
I am getting so tired of reading about rich, exorbitant greed heads and their over the top lifestyles and selfishness. There seems not to be a lack of them today. Many people admire them and consider him and others like him as successful, despite their 'crafty' ways.
Is there any other way of becoming so wealthy? Dishonesty is well rewarded.
35
You know what is really crazy about all of this? The most basic principle of accounting is "two eyes". In this case, a single government worker was responsible for disbursing over $2 billion
in refunds (500 million in one month alone) without so much as a flag going up alerting another employee or the minister of revenue. WOW!
However, to portray this as a loophole is wrong. Clearly this is fraud as tax refunds were submitted and paid when those submitting the request for refund knew no tax had been collected.
69
In Danish, skat translates to treasure in English.
12
@Billy Baynew Yes SKAT does translate to treasure - it also translates to “treasury” for ( revenue of the state).
I hope he names his yacht “Min Skat”.
@Billy Baynew Scat in English means something else.
I like to consider myself at least of average intelligence. I didn't understand this at all. The only thing I did take away is what some call fraud, others say loop-hold.
5
@Doc Holliday It would seem the fraudsters basically got refunded for a tax they never actually paid. They would submit a claim, but the tax authority did not actually take any steps to verify the validity of the claim.
16
The people claiming the refunds did so on the basis of a "buy" order that was canceled before settlement. So, they never owned the shares on which they were claiming a refund.
10
Stick with this news site, Doc. It's proof of objective journalism. After reading this site for several years you will likely conclude that loopholes are nothing more than efforts to facilitate and legalize fraud, ways to cater to the well-to-do who have the means to employ the legal experts who know how to exploit those very loopholes to make easy money. Without, in the end, fear of repercussions.
4
We had the Wolf of Wall Street scheming off the pink sheets.
Now we have the Rat of Dubai.
As Rolling Stone put it, 'this Robin Hood giving him self and his band of merry men' the spoils of this scam.
And after a slap in the wrist, both walk free.
Meantime tax payers, as usual, the dumb ones like most of us who are stupid enough to pay taxes on time, get to pay for this mess.
Basic decency keeps most of us from defrauding others, but oh how it hurts to see how well it worked for others, as I eat lunch at my desk for the 20th year in a row at my so called 'career'.
84
<quote>He comes across as an upbeat, middle-aged expat with an abiding fondness for music. </quote>
What's an expat? He's an immigrant, a non-caucasian to boot. Please don't make such colonial era factual observations!
5
@AK - He is a British citizen living in Dubai. Ask any Brits living in Dubai if they are "expats" and they will most likely say, "yes".
I was an American, living nearby, in Saudi Arabia for 5 years. I was part of the "expat community", as we called ourselves.
7
@AK He was born in the UK to Indian parents hence British. He done his crime and left the UK to Dubai NOT India amd that makes him an expat, end of... ;-)
2
Maybe they should get Bernie Sanders over there to instruct them on how to treat billionaires.
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Does anybody understand any of it?
Most of all, I don't understand the logic of Denmark or any other country not taxing dividends on investment made by foreigners. Does the (US) IRS return tax on dividends back to foreign investors? The article does not say.
Not sure if all the US investors duly report these earnings in their own tax returns.
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@SV
That is the purpose of the tax treaties. Basically it says that income from investments (dividends etc) will only be taxed once. As the pension and the owner/holder is in the US, the gains are subject to tax in the US. Without the tax treaty, the same income could be taxed twice. Why do this? To encourage international investment otherwise no one would have an incentive to invest outside of their home country. And yes, the tax treaty would be reciprocal.
It is crazy to think a tax authority would issue a refund for taxes collected without asking for evidence or verifying that taxes were actually collected.
This scheme is as brilliant as it is evil.
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@David W.
Brilliant, indeed.
Makes you wonder what else is out there....
3
@SV - If the stock is held in an IRA or other type of pension fund belonging to a US resident, it would be exempt from Danish tax under the tax treaty, and would not be taxable to the US resident until he took distributions.
The US does not withhold tax on dividends for non-citizen overseas stockholders.
If you hold foreign stock in a regular US brokerage account, dividends would be reported on a 1099. If a foreign country withheld tax on dividends, you would file a 1116 to get a full or partial credit against your US tax.
1
Have to say, that is an awesome plaid suit!!
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Gee, Trump may have missed an opportunity for "legal" tax fraud. Finally, a treaty he can support.
36
Genetically superior species gets to keep their toys. It is simple - survival of the (financially) fitest.
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@Rakh Mal - That may well be what the courtiers of Louis XVI thought as well, in 1791.
4
If this had happened at a private company people would be either laughing at them or wanting executive heads for lack of oversight or responsibility. A government office should have twice the number of employees overseeing funds than a private one because they are, after all, civil servants with all the attendant drawbacks.
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Whatalongstrangetrip--Yeah, but, those executives would walk away, probably with golden parachutes. That's how WE deal with white collar crime. Marijuana smokers we put in prison for many years.
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@Whatalongstrangetrip As @Milliband pointed out, Bernie Madoff proved that private companies aren't immune to fraud. For that matter, the scandals at BCCI and our own president's repeated rip-offs demonstrate the attendant drawbacks of private financial con artists.
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Obviously, Denmark has way too much money, if they can't be bothered to check on the transfer of110 billion bucks. Don't think I'd be banking there.
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The loss was $2 billion, not $110 billion.
2
Sounds like the guy should run for POTUS.
54
Lack of curiosity killed the SKAT.
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In an article of this length and importance, it would be very helpful to show a diagram of the money flow and the actors involved. It's hard to understand how the scheme worked by extracting it in bits and pieces from the text.
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@Ken L The article has a lot of words, but the scheme boils down to this:
1. Fraudsters manufactured "proof" that they purchased Danish stocks by trading empty promises to buy shares between fake US pension plans.
2. Fraudsters submitted this "proof" to the Danish government to claim refunds for taxes supposedly withheld from the dividends of these imaginary investments.
3. A single Danish civil servant approved all of these claims, sending billions in "refunds" from the public coffers to the fraudsters' bank accounts.
A simple analogy would be: You buy an expensive item from a store online, but cancel the order immediately after receiving the order confirmation. You take the original order confirmation to your buddy who works at the store. The buddy approves the "return" of this item you never actually bought and applies a "refund" to your credit card.
If you say, "That wouldn't work, because the store's system wouldn't allow it." Well, yeah. No system should, but Denmark's did.
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@T. K. Marnell
Good analogy and explanation.
5
Some of the fraud was intricate. Other parts of it was based on SKAT not verifying if any WHT had been collected at all on dividends from the company which allegedly had collected it. The big scandal is that SKAT did not verify at all with information available on their systems. They paid out Money if they received pdf files of documents that implied that wht was paid. This is something completly different than the ex-cum scheemes in Germany.
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"One [of the retirement plans] would place an order to short a chunk of shares of Danish stock — essentially, a promise to buy the shares once they dipped below a certain price."
This makes no sense: an order to short shares is simply an order to sell shares one does not own. Eventually, the shorted shares will have to be bought, but there is no promise to buy them at any specific price.
"Soon after, an order was placed by another of the 27 plans to buy the order for the shorted shares. "
This is similarly gibberish. What is an "order" to buy "the order for the shorted shares."? Presumably what is meant is that an order was placed to buy shares at a given price, below the current market price. This order could not be executed right away, but would stay on the books and be executed if the shares declined to the specified price.
If the open buy order "was proof enough for SKAT to approve a refund," then the initial order to short the shares would seem to have been unnecessary.
This description of how the scheme worked is basically incomprehensible. NYT should hold itself to a higher standard.
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@retired guy
No, my tax system should have had the higher standard, not the NYT!!!
6
@retired guy I agree - I was similarly confused by the terminology used and the subsequent explanation.
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@retired guy
At the end of the day they are not real investors and do not want to hold any shares and lock up the money in it. Instead of buying and selling they did the opposite. So the transaction will seem like they are in long position. Eg. If you are getting a tax refund $27 for ever $1000 transaction, all you have to do it do the $1000 transaction again and again using the same money. That was my understanding.
But I see where you are coming from...based on the article it doesn't seems too complicated to pull off such a massive scheme unless it is beyond the knowledge limit of a normal soul.
1
What a clever ruse. It’s been said that at the end of the day, all business is based on trust.
As those days come crashing to an end, we’re left with trust abusers at an epic level. From Trump on down to Shah, these brave new con artists are encouraging the malignant spread of scams around the world.
Penalties for this type of abuse need to brought up to a level that reflect the degree of damage to society that they inflict.
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@RjW They are not brave, they are spineless wretched thieves.
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@RjW
Slight word change suggestion: substitute "brazen" for "brave" when talking about these "new con artists" and you'll have hit the nail on the proverbial head.
3