I blew the whistle on a massive tax fraud

“We’d meet at airports in 20-foot limousines and be taken to places like the Atlantis Hotel in Dubai or the Grand Prix in Singapore. We’d spend a hundred thousand dollars at the bar.”

In 2013, Gus Baines was a young, ambitious lawyer, enjoying the high life that came with working at one of the city’s highly profitable hedge funds.

Today, he is unemployed and has lost most of his fortune, having spent years fighting legal battles and trying to clear his name of being linked to a massive tax fraud.

He says the irony is that he uncovered the scam in the first place – only to find himself one of the targets of a £1.4bn lawsuit.

He thinks one month later The case is over This brings to an end eight years of legal arguments and one of the highest value civil cases ever in the UK.

The Danish Tax Authority has been left licking its wounds, after failing to prove that a large group of defendants, including Baines, were responsible for its huge losses.

It all started in 2009, when a banker named Sanjay Shah set up a hedge fund in London called Solo Capital. It also had offices in Dubai. It was one of a network of funds, banks and statutory bodies in which it became heavily involved The so-called ex-cum trade.

This focused on transactions in which shares were sold from one investor to another immediately before a dividend was paid (cum-dividend) but were delivered afterwards (ex-dividend).

Those involved took advantage of the delay in processing the sale to create confusion about who actually owned the shares at the time the dividend was paid. This tactic allowed both parties to claim rebates for withholding tax—a tax that was paid only once, when the dividend was released.

From the outside, it was complicated, but to those involved it led to larger and more elaborate deals that ultimately cost taxpayers across Europe billions.

It initially became popular in Germany, before spreading to other countries including France, Belgium, Italy and Austria. Solo Capital targeted Denmark, where the bulk of its trading was conducted from 2013 onwards.

Jas Baines joined the firm in 2010 as lead lawyer, but continues to manage the London office. At the time, Solo was “a successful company, making good profits in five or six different areas.”

Making money meant enjoying the high life, as employees took trips to places like Las Vegas, Singapore and Dubai.

“What I will say about Sanjay is that he knew how to throw a party,” he says.

“One time we were at the Ku De Ta club at the Marina Bay Sands hotel in Singapore. He bought 20 bottles of vintage Dom Perignon champagne, and people were spraying each other with the stuff.

“People have likened him to the Wolf of Wall Street and things like that.”

It didn’t end there. “Sanjay organized private parties in Dubai with Prince. A small room with him and his friends for three or four million dollars for the evening… private parties with Snoop Dogg.”

But by mid-2014, Baines had fallen out with his boss and left the company for a competitor. At that time, financial transactions targeting Denmark were increasing dramatically.

“I was hearing from people who left Solo that Sanjay was doing some big deals in 2014, but look, I moved on, and it didn’t have much to do with me,” he says.

“But then I heard that Sanjay actually made close to €100 million in deals from Denmark in 2013, closer to €250 million in 2014 and was looking for €1 billion in 2015.”

Alarm bells were ringing.

“I thought this couldn’t be true. I don’t think these deals were invalid or criminal in some way. It’s just that any country that embezzled a billion euros would scream bloody murder.”

Solo Capital isn’t the only company targeting Denmark now. Others were participating in this act. Gus thought it was only a matter of time before the house of cards collapsed.

“I was quite confident that I had done nothing wrong, but I knew that if this continued and exploded in spectacular fashion, I would be drawn in,” he explains.

With that in mind, in 2015 he decided to blow the whistle.

He contacted a Danish lawyer, who in turn connected him with the Danish police. He spent two and a half years helping them understand how the former vice president’s scam worked.

Danish prosecutors did not target Mr Baines. Their attention was firmly focused on Mr. Shah. The 54-year-old was eventually extradited from Dubai to face fraud charges – and in December last year he was extradited He was sentenced to 12 years in prison.

This was the harshest penalty ever imposed in Denmark in a fraud case. It is currently resuming.

But when the Danish tax authority, Skatteforvaltningen (Skat), launched its massive case, seeking to recover its lost money, Baines was one of more than 100 individual and corporate defendants initially targeted – along with Shah.

With that lawsuit hanging over him, it became out of the question for him to work as a lawyer, or obtain a role in the City of London.

“It’s impossible to get a job if you’re being sued as part of a $2 billion international tax fraud case,” he says.

However, in October, High Court judge Justice Andrew Baker dismissed Skatt’s claims.

Acknowledging that “greed can be a powerful motive, and I think there is a lot of greed here,” he nevertheless concluded that Skatt had failed to prove that she had been the victim of deception.

He added, “The Authority’s controls in evaluating and paying claims for profit tax refunds were so weak that they did not exist.”

This appears to echo a statement previously made by Mr Shah in a German television interview in 2021, which was also cited in the ruling:

“Why do they pay for years and years, and after four years of paying they say, ‘Oh, we made a mistake, or we were cheated,'” he said.

“If there is a big sign on the street that says ‘Please Help Yourself,’ I or someone else will go help themselves.”

There may still be an appeal. But for Baines, the ruling provided some much-needed closure — a chance, he says, to move on.