A second hedge-fund trader was named by Danish prosecutors as a defendant in a dividend tax scheme they say defrauded the Nordic country out of 9.6 billion kroner ($1.6 billion).
The document alleges that Shah received at least 80 percent of around 9 billion kroner in taxes illegally refunded as a result of trades on behalf of pension funds that were either fictitious or didn’t entitle the companies to refunds.
The indictment sheds new light on what’s become known as the Cum-Ex scandal, a controversial trading strategy that used the rapid trade of stocks to claim multiple refunds on dividend taxes paid only once. Denmark alleges that Patterson helped Shah orchestrate a complex web of financiers across the globe.
A veteran London trader, Patterson worked for a unit of Banco Santander SA in the mid-2000s before joining Macquarie Group Ltd. in 2008, U.K. filings show. He joined Solo in 2013.
A London lawyer believed to be representing Patterson in a civil lawsuit related to Cum-Ex didn’t immediately respond to requests for comment.
A spokesman for Shah said he hasn’t seen the indictment, but challenged the process, complaining that media reports suggest Danish prosecutors are “not sure if the trades are fictitious or not.”
“If they think the trades are not fictitious, surely this is a civil tax matter and not a criminal matter,” said Jack Irvine, Shah’s spokesman.
In Denmark, the public may see an indictment seven days after it has been served or two weeks after it has been mailed to the defendant, according to Danish prosecutors.
The documents reveal new details of how prosecutors believe the operation worked, escalating the pressure on Shah.
Described by Danish authorities as the “mastermind” of Cum-Ex trades, Shah has said he took advantage of loopholes in Danish law, and is willing to come to the country for a trial to prove his innocence.
He will not “be held for years in pretrial detention,” Irvine said.
Patterson helped Shah deceive the Danish tax agency by applying for over 553 million kroner in tax refunds on behalf of 71 U.S. pension firms and others, prosecutors said in the indictment.
More suspects could be named as the investigation continues, Per Fiig, acting head of the State Prosecutor’s Office, said in an interview earlier this month. He said that his office could be in a position by March to decide whether to file more charges.
The indictment marks a milestone in a scandal that has outraged Danes since they learned about $2 billion had evaporated from state coffers as a result of the alleged fraud. The wider Cum-Ex scandal is still being investigated in Germany and the U.K.
The practice, named for the Latin term for “With-Without,” took advantage of tax laws that seemed to allow multiple investors to claim refunds on a dividend that was paid only once.
— With assistance from Donal Griffin
