Danish Tax Fraud Case Against Expat in Jeopardy Over Tappings

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By Karin Jensen

A district court will decide Aug. 23 whether the Danish Tax Authority (SKAT) will be allowed to use phone tappings as evidence against a Danish expatriate charged with gross tax fraud to the tune of 50 million kroner ($7.9 million).

The tappings were obtained by police during an investigation, that lasted more than five years, relating to possible tax avoidance by a Danish national.

SKAT reported the Dane to the police in 2006, on suspicion that he lived in Denmark while claiming to live abroad. The Danish police obtained a court order to tap the Dane, whose spouse and children live in Denmark. Poul Gade, a senior lawyer at Bech-Bruun—the firm representing the Danish expatriate—told Bloomberg BNA Aug. 15 that a thorough investigation into their client began after that. It included scrutiny of tax information as well as phone tappings and mobile phone tracking.

The Danish expatriate was arrested and charged with tax fraud after about six months of investigation, but police finally dropped the case after a further five years of looking into the matter.

However, SKAT decided to take the case to the National Tax Tribunal, reclaiming more than 50 million kroner from the accused during the period 1996-2006.

“The case at the National Tax Tribunal will depend on the ruling in the District Court,” Gade said.

He added that the tribunal will deliver a ruling “sometime this autumn” on whether the accused is taxable in Denmark and if so, “how much the accused will have to repay.”

Client-lawyer Conversations

SKAT’s use of the police’s tappings in the case violates the law, Gade said. Furthermore, included in the tappings are police tappings of phone conversations between the client and his lawyer, which is illegal according to Danish law, Gade said.

“The Administration of Justice Act says that if the police close a case, all tapping material has to be destroyed. But SKAT has kept the material. It’s perfectly normal that SKAT and the police exchange material during a joint investigation, but the question is what happens once the police close a case. Can SKAT keep the material or should the material be retained? Because the police are subject to the Administration of Justice Act, we believe the material should be destroyed,” Gade said.

There is no legal practice in this area so the district court case is a principle case. The key question, which will form precedent in other future cases, is whether SKAT is allowed to actively use material that was either illegal when the police obtained it or should have been destroyed when the police ended their investigation without charging the Danish expatriate with a crime, a partner at Bech-Bruun told Bloomberg BNA.

“The first is obviously the worst. But the second category is bad enough because we’re talking written summaries of telephone tappings, where the actual tapes have been destroyed by the police,” said the partner, who spoke on the condition of anonymity.

Attorneys Question Reliance on Summaries

Because the tapes no longer exist, it is impossible to verify whether the summaries provide a complete picture of what was said in the phone calls, which means the accused is prevented from producing counterclaims, which is an important legal principle, the Bech-Bruun partner said.

“The core of the case is whether SKAT should be allowed further scope to obtain and keep evidence that the police have,” the partner said.

SKAT Responds

SKAT can’t comment on specific citizens or companies due to duty of confidentiality, a spokesperson told Bloomberg BNA.

However, in a written statement sent to Bloomberg BNA, SKAT said in general terms it can state that—for the sake of the best possible enlightenment of the case as well as the consideration to obtain the materially right decision—evidence obtained by the police and subsequently disclosed legally to SKAT can be used in a tax case even though the police subsequently had to destroy the material.

The tax assessments made by SKAT in tax cases are regulated by inquisitorial procedure as well as rules laid down by the Tax Administration Act, the Tax Control Act, and the Danish Civil Protection Act. This means that the special rules within criminal justice under the Administration of Justice Act therefore don’t apply to SKAT’s handling of tax cases, SKAT said.

To contact the reporter on this story: Karin Jensen in Copenhagen at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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