April 8, 2020 — Hughes Hubbard has won pivotal rulings for the government of Denmark in its efforts to recover $2.1 billion stolen through an international tax fraud scheme involving U.S. pension plans and individuals.

On Jan. 23, a New York federal court dismissed counterclaims brought against the Customs and Tax Administration of the Kingdom of Denmark, or Skatteforvaltningen (SKAT), by The Goldstein Law Group PC 401(k) Profit Sharing Plan -- one of over a hundred pension plans accused of taking part in the scheme -- and its trustee Sheldon Goldstein. In a separate opinion issued the same day, the Court dismissed counterclaims asserted by another group of pension plans that it referred to as the "Utah plans." In total, the Court dismissed over $1 million in counterclaims.

The Goldstein plan sought a declaration and anti-suit injunction, holding that the court's decisions in the case be binding on SKAT in jurisdictions worldwide, including administrative proceedings in Denmark, and claimed that SKAT was liable for an unpaid refund claim under a theory of promissory estoppel.

U.S. District Judge Lewis Kaplan rejected the claim for declaratory and injunctive relief on multiple grounds, including lack of standing and failure to state a claim. The Court noted that the purpose of the claim was to win "a race to res judicata" that would prevent SKAT from trying to enforce a favorable foreign judgment. Such a ruling would increase the friction between the U.S. and Danish governments.

"There is a far better remedy available to Goldstein: waiting for a concrete dispute involving conflicting judgments and acting at that time," Judge Kaplan wrote in his decision. The Court also rejected Goldstein's argument that SKAT's pattern of paying refunds on applications that later turned out to be fraudulent constituted a "promise" to honor similar applications, and dismissed the additional counterclaim for promissory estoppel.

In a separate opinion, the Court dismissed counterclaims by the Utah plans, which claimed that SKAT was liable for all applications for tax refunds that SKAT had refused to pay, under theories of promissory estoppel and unjust enrichment. The Court held that the plans failed to identify anything that SKAT did that constituted a promise for purposes of a promissory estoppel claim. Ruling more broadly, the Court held that all the Utah plans' counterclaims were barred by the act of state doctrine. "Holding that an agency of Denmark unlawfully denied an application for a tax refund would require examining the validity of a sovereign act by the Danish government in Denmark." The Court's ruling under the act of state doctrine effectively bars all similar counterclaims by other plans under the law of any state or foreign country.

In 2018, SKAT filed suit against Goldstein and the Utah plans, alleging that they submitted false tax refund claims for taxes supposedly withheld on dividends from stocks they did not own in publicly-traded Danish companies. Under a U.S.-Denmark double taxation treaty, the withholding tax may be fully refunded to certain tax-exempt American shareholders such as qualified pension plans.

In 2019, HHR helped SKAT execute a major settlement with 61 other U.S. pension plans and several associated individuals and companies that agreed to pay back around DKK 1.6 billion (approximately $250 million) which SKAT had paid out in dividend refunds from 2012 to 2015. The firm has filed more than 180 suits in U.S. courts across the nation on behalf of the administration.

All of the U.S. federal cases are consolidated in a multidistrict litigation before Judge Kaplan, and four additional cases are pending in state courts. HHR will continue to press forward with document discovery and depositions this year as part of SKAT's recovery efforts in U.S. courts.

Bill Maguire, Marc Weinstein and Neil Oxford lead the HHR team representing SKAT, which includes Dustin Smith, John McGoey, Greg Farrell, Valerie Cahan, Adam Weinstein, James Henseler, Jack Kilgard, Carolyn Harbus, Erin Pamukcu, Natalie McCrea, Rich Bosch, Sean Aiello and Rebecca Hutt.