Benchmark Litigation Highlights Hughes Hubbard’s Success Representing SKAT in Fraud Litigation

Benchmark Litigation highlighted Hughes Hubbard’s successes and strategies in representing the Customs and Tax Administration of the Kingdom of Denmark, or Skatteforvaltningen (SKAT), in its ongoing multi-district litigation to recover $1.1 billion from a tax fraud scheme involving fraudulent claims for refunds on tax withheld from Danish dividends, including the U.S. Court of Appeals for the Second Circuit recently affirming a judgment exceeding $476 million and rejecting the defendants’ challenge to SKAT’s fraud claims.

In a Q&A with the publication, Marc Weinstein discussed the strategy behind the litigation.

After filing approximately 180 cases in 11 federal district courts, the firm sought to consolidate the cases in New York through multidistrict litigation, a strategy designed to centralize the proceedings, streamline discovery and enable coordinated recoveries.

“Hughes Hubbard is very familiar with multidistrict litigation in which cases from jurisdictions around the country are consolidated into one. We decided to use a strategy typically employed on the defense side: to petition to consolidate the cases in New York.”

Weinstein also discussed the defendants’ argument that SKAT’s claims were barred by the common law revenue rule and the firm’s approach to the issue.

“We had identified this as a potential issue on day one and drafted the complaints with care to avoid this trap. Our theory of the case is that this wasn’t tax fraud at all – the pension plans never owned any shares, so never received any dividends, and so never paid any tax.”

At trial, Weinstein said the team also adapted its strategy to focus on red flags that would help explain the complex financial fraud allegations to the jury.

“It’s always a challenge to explain complex financial fraud to a jury, particularly without any smoking gun evidence, and we had to pivot the expert case during trial to focus on the red flags that we said would have alerted anyone with any market experience to the fact that this was very obviously a giant fraud,” Weinstein said. “At its simplest, our case was that these trades were too good to be true, and the jury agreed.”

Weinstein noted that Hughes Hubbard’s work for SKAT continues as the firm seeks to enforce the judgments obtained in the litigation.

“It’s by no means over! We are busy enforcing the jury award, plus another $164 million bench trial judgment that was handed down last fall against the three other fraudsters. To date, through US litigation we have recovered more than $480 million for SKAT and are looking to add to that figure.”

Read the article (subscription required).