Danish Law Firm Bech-Bruun Hit With $58.6 Million Penalty Over Dividend Tax Fraud Scheme

In a significant legal blow, Denmark's prominent law firm, Bech-Bruun, has been ordered by the country's highest court to pay DKK 400 million ($58.6 million) for its involvement in a dividend tax fraud scheme. The Supreme Court of Denmark ruled that between 2014 and 2015, a Bech-Bruun lawyer assisted Germany's North Channel Bank in receiving DKK 1.135 billion ($166.6 million) in tax refunds from Denmark's tax authority, Skatteforvaltningen (SKAT). However, the court deemed these refunds "entirely unjustified" and based on "fictitious transactions."

Bech-Bruun, responding to the judgment, described it as "very harsh." The court's decision rested on whether the law firm had acted in a "reasonable manner" and if there was a "causal connection" between its advice and SKAT's financial loss. The unnamed Bech-Bruun lawyer was found to have neglected the imminent risk of the bank's involvement in an unjustified reimbursement model for dividend tax.

The court held Bech-Bruun liable for "a little over" DKK 700 million, reduced from the initial DKK 1.135 million paid out by SKAT. The final financial penalty for Bech-Bruun amounted to DKK 400 million, determined by the court based on the firm's professional "adequacy."

Steen Rode, Bech-Bruun's chief executive partner, expressed the firm's disagreement with the ruling, stating, "We find this to be a very harsh judgment, even though the Supreme Court has reduced the amount of damages due to the fact that the bank committed fraud using fictitious shares and dividends." He emphasized that the damages are fully covered by insurance.

The Supreme Court's decision marks a significant reputational setback for Bech-Bruun, one of Denmark's prominent 'big four' law firms with a history dating back to 1872. The ruling stemmed from a dividend tax scheme that resembled the infamous cum-ex scandal, which resulted in an estimated €150 billion ($163 billion) in tax losses for EU governments between 2000 and 2020. The cum-ex scheme involved trading shares around dividend pay-out days, allowing participants to claim rebates.

Bech-Bruun's involvement in the dividend tax fraud scheme highlights the legal challenges faced by major law firms, even as they navigate complex financial transactions. The financial penalty and reputational damage underscore the importance of stringent compliance measures within legal practices to avoid entanglement in illicit activities.

By fLEXI tEAM