Weeks after Danish judges sentenced hedge fund trader Sanjay Shah to 12 years in prison, the country’s lawyers turned to a U.S. court in a bid to recoup about $500 million lost in the Cum-Ex tax dividend scandal.

Lawyers for the Nordic country told a New York jury that a group of US investors helped Shah steal from the Danish treasury by filing 1,200 fraudulent requests for tax rebates on dividends.

“This case is about greed and theft,” Marc A. Weinstein, a lawyer for the Danish tax authority, said during opening statements at a civil trial that started this week in federal court in New York. “They lined their own pockets, the pockets of their friends and families and the pockets of their coconspirators with the funds they stole from Denmark.”

Shah, who was sentenced to prison last month for orchestrating a scheme that netted 9 billion kroner ($1.24 billion) through thousands of sham dividend tax refund applications, has become the public face of the Cum-Ex tax scandal that has engulfed bankers and lawyers in several European countries. Three people have been convicted of Cum-Ex related crimes in Denmark, and about 20 in Germany.

Cum-Ex was a controversial trading strategy designed to obtain duplicate refunds by taking advantage of how dividend taxes were collected and regulated a decade ago. Germany is looking at about 1,800 suspects from across the global financial industry in probes linked to the practice.

Denmark’s Customs and Tax Administration, also known as SKAT, has been pursuing traders and businesses around the world in a bid to claw back the billions it says it lost through trading schemes spearheaded by Shah. The case is the first to go to trial in the U.S. over Cum-Ex fraud linked to the hedge fund founder.

But a lawyer for two of the investors, Richard Markowitz, and his wife, Jocelyn Markowitz, told the jury that SKAT allowed Cum-Ex transactions to flourish for years before trying to stop the practice. He compared the tax agency to the town officials in the movie Jaws who were so focused on the tourist trade that they “didn’t do anything until the bodies started piling up.”

“Rich and Jocelyn did not do anything wrong. They didn’t lie, they didn’t cheat,” said Peter Neiman, a lawyer for the couple, during his opening arguments. “SKAT was not careful.” 

Shah was a suspect in probes in both Denmark and Germany. German prosecutors also accused him of routing Cum-Ex deals through the U.S., saying in one indictment that he used a Jewish school in Queens to execute trades totaling €920 million euros ($948 million) as part of a plan to deceive tax authorities.

Shah, the founder of Solo Capital, became the most prominent figure of the Cum-Ex scandal after a 2020 Bloomberg TV interview where he said that “bankers don’t have morals” and expressed no remorse for taking advantage of what he said were loopholes in some countries’ tax codes.

Denmark says that Richard Markowitz, John van Merkensteijn and two of their partners at a New York financial services firm, Argre Management, were recruited by Shah to take part in the scheme in 2012. Pension plans created by Argre became customers of Shah’s hedge fund, which served as the purported custodian of Argre’s Danish shares, and issued fraudulent statements for a rebate on dividend taxes that were withheld.

The plans, including ones established by their wives, Jocelyn Markowitz and Elizabeth van Merkensteijn, later submitted those statements as proof that the company was entitled to the refunds, the Danish tax agency says.

SKAT has sued approximately 260 pension plans and individuals in the U.S. over Cum-Ex. The country has also filed civil cases seeking to claw back Cum-Ex funds in other countries. A trial in London wrapped up last month where SKAT is suing dozens of traders and businesses. 

If Neiman agreed with the Danish tax agency on anything, it was that Shah was the real villain. He said that Markowitz and Van Merkensteijn, “honestly and in good faith” entered into what they believed were legitimate dividend arbitrage transactions, first in Germany, later in Belgium and then in Denmark, only to find out that Shah had deceived them.

“It was only years later that they found out that Sanjay Shah had at some point stopped doing what he had promised and had begun to lie to them over and over and over again,” he said.

“The blame here lies with Sanjay Shah and Solo,” said Sharon McCarthy, a lawyer for the van Merkensteijns.

The case is In Re: Customs and Tax Administration of the Kingdom of Denmark (Skatteforvaltningen) Tax Refund Scheme Litigation, 18-md-2865, U.S. District Court, Southern District of New York. 

A former Credit Suisse Group AG client was charged with a tax-evasion conspiracy in the U.S. as officials weigh whether the bank — now owned by UBS Group AG — breached a 2014 plea deal in which it paid $2.6 billion and admitted helping thousands of Americans evade taxes.

Gilda Rosenberg, a Florida businesswoman, conspired with two family members in hiding $90 million in assets from the Internal Revenue Service between 2010 and 2017, federal prosecutors charged Wednesday. She’s accused of acting to conceal money in undeclared foreign accounts while also filing false returns and evading taxes on unreported income. 

The extent to which Credit Suisse complied with its plea deal took on new focus after a 2023 Senate Finance Committee report said there were “major violations” of its agreement that requires the bank to identify undeclared U.S. accounts to the IRS. In the report, Democratic staff on the committee said the bank had still failed to fully disclose US assets despite having identified “thousands of previously undeclared accounts” valued at more than $1.3 billion. 

In response to the report, Credit Suisse said it was cooperating and had provided information to U.S. authorities on potentially undeclared accounts held by American clients.

A spokesman for UBS declined to comment Thursday on the case against Rosenberg. An attorney for Rosenberg declined to comment.   

Telling the IRS

The 2023 report doesn’t name the Rosenbergs but describes how the bank allegedly helped a family of dual citizens of the U.S. and Latin American country evade taxes. Whistleblowers told the committee the family members held nearly $100 million at Credit Suisse for a decade before transferring those assets to other banks without telling the IRS. 

The charge against Rosenberg doesn’t identify Credit Suisse, but refer to the same allegations described in the Senate report, according to people familiar with the matter. U.S. authorities are weighing whether the Swiss bank breached the terms of its 2014 deal, said the people, who asked not to be identified discussing internal discussions.

UBS said in its third-quarter report that it had a provision for potential costs tied to inquiries into its cross-border wealth management services, including Credit Suisse’s compliance with the 2014 plea deal. It didn’t disclose an amount for the provision.

UBS could announce a settlement with prosecutors for violating terms of the 2014 deal as soon as this week, the Wall Street Journal reported on Thursday. The bank could agree to pay at least hundreds of millions of dollars, according to the report. The UBS spokesperson declined to comment on a possible settlement. 

Under its plea agreement with the U.S., Credit Suisse had to disclose all undeclared U.S. accounts closed and transferred from 2008 to 2014. Disclosing those account holders, known as “leaver lists,” was a U.S. requirement for Credit Suisse, several other Swiss banks that faced criminal charges, and 80 Swiss banks that made deals to avoid prosecution.

At the time of the report in 2023, Senator Ron Wyden, the Oregon Democrat who chairs the committee, slammed “greedy Swiss bankers” who appeared to be engaged in a “massive, ongoing conspiracy to help ultra-wealthy U.S. citizens to evade taxes.”

The report was released around the same time that Credit Suisse was being sold to rival UBS in a 3 billion franc ($3.3 billion) deal brokered by the Swiss government after years of scandal and mismanagement. 

‘Donate’ assets

Gilda Rosenberg was charged in a so-called criminal information. In a separate case last year, she pleaded guilty in Texas to conspiracy to commit wire fraud involving a Miami vending machine company she owns. She is scheduled to be sentenced on April 30. 

Rosenberg, a U.S. citizen, was born in Colombia and lives in south Florida, according to the tax charge. She conspired with two family members also born in Colombia, the U.S. alleges. They hid money in accounts in Switzerland, Spain, Israel and Andorra, prosecutors charged. 

Rosenberg and one relative agreed to sign documents purporting to “donate” assets in undeclared accounts to the other relative, the U.S. alleges. She also caused her return preparer to underreport income to the IRS and falsely say she had no interest in a foreign financial account, according to the charge.  

Since the bank’s 2014 guilty plea, other U.S. clients of Credit Suisse have been charged in tax cases. In 2016, Dan Horsky pleaded guilty to hiding more than $200 million in assets from the IRS. A Brazilian-American businessman, Dan Rotta, was indicted last year for allegedly using Credit Suisse, UBS and other Swiss banks to hide more than $20 million in assets from U.S. tax authorities over 35 years.