Hedge fund boss in £1.5bn tax fraud trial
A LONDON-born hedge fund boss accused of masterminding a £1.5bn tax fraud is facing one of the most expensive trials in British legal history.
Sanjay Shah is suspected of devising an elaborate scheme to swindle Danish tax authorities, which have brought a civil case against him in London’s High Court.
Experts have warned legal fees alone for the ‘super-trial’ are likely to hit £250m. It is also set to drag on for more than a year and involve the analysis of millions of documents, including financial records from the US, Malaysia and Luxembourg. In the latest twist, the Danish State Prosecutor for Serious Economic and International Crime (SØIK) has seized a £14.7m property near Hyde Park in central London from an unnamed ‘suspect’. It emerged the property is a luxury block of flats owned by Shah and rented out.
Shah has denied any wrongdoing and insisted he was merely exploiting a legal tax loophole. Around £500m of his assets around the world – including homes in Dubai and London – are reported to have been frozen during investigations in multiple jurisdictions into his business activities. The 49-year-old married father of three –who has staged concerts by Sir Elton John and Ed Sheeran for his charity Autism Rocks – lives on a private island in the Palm Jumeirah development in Dubai (pictured top). Super-rich owners of neighbouring properties include David and Victoria Beckham and Bollywood star Shilpa Shetty.
But Shah’s business empire and fortune are under threat. The tycoon, his hedge fund Solo Capital Partners – which was shut down in 2016 – and up to 80 other defendants, including his wife Usha, are accused of designing ‘sham transactions’ to apply for tax relief on share dividends from Danish authorities.
Under Danish law, companies withhold 27pc of share dividends to pay directly to the taxman, but foreign investors can have the tax refunded.
The Danish tax authority Skat says it was tricked into paying huge refunds to Shah and his alleged associates between 2012 and 2015. The alleged scam involves the use of so-called ‘cum-ex’ trades. Cum-ex is Latin for ‘with-without’ and refers to the status of shares before and after a dividend is issued.
Other countries including Germany, France and Italy claim they have lost tens of billions of euros in similar scams, perpetrated by hundreds of individuals and dozens of investment banks, private banks and funds.
But it has become a national embarrassment for Danish tax authorities, which have been pursuing Shah for five years.
Skat has described Shah as the ‘primary individual responsible for the fraudulent scheme’.
A judge last month gave the go-ahead for the trial.
The expected £250m in legal fees excludes the cost to the British court system. Judge Mr Justice Andrew Baker warned the length of the trial was ‘sufficiently massive’ to raise ‘gross concerns about practicability from the court’s point of view’.
He also warned the trial could tie up the court for up to 50 weeks, and is likely to exceed a year when breaks in the court schedule are taken into account.
London is seen as a hub for cross-border financial disputes, which is why it will stage the huge legal battle.
But judges are said to be furious that a case brought by Danish tax authorities is set to bog down the British courts.
The case could potentially prove embarrassing for the Government after it emerged that Shah enlisted the services of Geoffrey Cox QC, then a backbench Tory MP but now Attorney General, during the period covered by the alleged fraud.
The Attorney General’s Office said Cox has had no involvement with the case since he was appointed to the Government role in July 2018.
Before his appointment as Attorney General, Cox established himself as one of the country’s highest-earning MPs through his work as a barrister.
A spokesman said: ‘Mr Cox’s involvement with Mr Shah was as a leading barrister instructed in the normal way to advise on and appear in proceedings in the English courts. The Register of Members Interests contains details of any financial interest a Member has, or any benefit they receive. I can confirm that Mr Cox’s register is up to date.’
Shah grew up in Marylebone, London, and dropped out of a medicine degree at King’s College London before qualifying as a chartered accountant.
He was employed by the likes of Morgan Stanley, Credit Suisse and the Dutch bank Rabobank.
When he lost his job following the 2008 financial crash, he created Solo Capital, primarily running the firm from Dubai, where he moved in 2009.
A spokesman for Shah said: ‘Sanjay continues to maintain his innocence and his position was that he had two sets of legal advice that the trades were legal.’