The U.S. Court of Appeals for the Second Circuit has upheld a verdict against Richard Markowitz and several co-defendants for defrauding Skatteforvaltningen, the tax authority of Denmark. The court's decision, issued on August 31, 2026, confirms that the defendants submitted false claims for tax refunds that they were never entitled to under the U.S.-Denmark tax treaty. This ruling affects the defendants, who face significant financial penalties, and underscores the legal consequences of fraudulent tax refund schemes.
The case, Skatteforvaltningen v. Markowitz (Docket No. 25-916), centers around a complex scheme involving dividend tax arbitrage. The defendants, including Markowitz, his wife Jocelyn, and John and Elizabeth van Merkensteijn, were found guilty by a jury of submitting fraudulent tax refund claims to Skat. The court noted that the defendants conceded they had never received any dividends from Danish companies, which were a prerequisite for their refund claims.
The dispute arose from the defendants' involvement in a trading strategy that exploited tax treaties between the U.S. and Denmark. They claimed to own shares in Danish companies and sought refunds for taxes that had supposedly been withheld on dividends. However, the jury did not believe the defendants' claims that they were misled by their trading partner into believing they were entitled to these refunds.
The case reached the Second Circuit after the defendants appealed the judgments entered against them by the U.S. District Court for the Southern District of New York. They argued that the entire suit was barred by the common law revenue rule, which generally prohibits courts from enforcing foreign tax laws. They also contended that the district court made errors in excluding certain evidence and that there was insufficient evidence to support the fraud judgments against the wives of two defendants.
The court ruled against the defendants on all counts. It stated, "Because defendants conceded that they never received any dividends on Danish equities and thus never owed or paid any foreign taxes, Skat's suit does not seek to enforce foreign tax laws." The ruling emphasized that while the defendants may have exploited the Danish tax system, Skat's attempt to recover the funds was not a claim for the collection of foreign taxes as defined by the revenue rule.
The judges on the panel included William J. Nardini, who authored the opinion, alongside judges Lee and Robinson. The court also found no abuse of discretion in the district court's evidentiary rulings and confirmed that there was ample evidence to support the jury's conclusion regarding the agency relationships between the defendants and their wives.
This ruling has significant implications for the defendants, who now face a judgment totaling over $476 million, which includes the amounts Skat paid out based on their fraudulent claims. The decision serves as a warning to others who might consider engaging in similar fraudulent activities, highlighting the legal risks and financial repercussions involved.
The case also sets a precedent regarding the application of the common law revenue rule in situations where fraud is involved. By clarifying that fraudulent claims do not fall under the protection of the revenue rule, the court has opened the door for foreign tax authorities to seek recovery of funds obtained through deceitful practices.
Looking ahead, the defendants may seek further appeals in higher courts, but the path forward appears challenging given the clarity of the court's ruling. There may also be related cases pending, particularly as Skat continues to pursue other defendants involved in similar schemes.
As the legal landscape evolves, this case will likely be referenced in future discussions about the enforcement of tax laws and the consequences of fraudulent financial activities.