Broker Looks To Push Tax Fraud Trial As Virus Variant Surges

By Christopher Crosby
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Law360, London (January 8, 2021, 5:23 PM GMT) -- A British financial broker asked on Friday to halt an upcoming trial over its alleged role in a sprawling tax fraud case, amid concerns about the new COVID-19 variant and anxiety that remote proceedings will intrude upon its privacy.

David Scorey QC, counsel for Tradition Financial Services, asked a High Court judge to shelve the five-week hearing scheduled for late January over concerns about having its staff travel into London on public transportation and taxis.

Tradition, an intermediary between large financial institutions and traders, is fighting accusations that it aided a major international scam involving buying and selling credits to offset carbon emissions. Both Deutsche Bank AG and Citigroup have settled related lawsuits brought by several trading companies that went bust when they were hit with massive tax bills.

A remote hearing isn't a backup option because Tradition's employees would need to arrange a quiet space in their homes, something that isn't always possible if their families are confined by the pandemic, Scorey said.

"The courts are being asked to move things along," Scorey said, but not "plow on" regardless of the consequences.

"The prejudice to the claimants is money," he continued. "But to the defendants it is incalculable."

The lawsuit brought by liquidators for Bilta (UK) Ltd. and other defunct traders accuses Tradition Financial Services of acting as a middleman helping suspicious holding companies trade the carbon credits.

The lawsuit is just one of many involving carousel fraud, where the value-added tax levied on carbon credits is effectively stolen from national tax collectors. Authorities estimate the carousel fraud in the carbon market has cost the European Union between €6 billion and €8 billion ($9.3 billion).

The credits are permits issued through the European Union that allow companies to produce a certain amount of carbon emissions. The permits can be traded overseas, and European authorities say fraudsters have exploited the way the VAT is treated in cross-border trades where the movement of goods is free from the tax, to avoid paying any tax on the carbon credits in Britain.

Bilta and the other traders have sued brokers and major financial institutions like Deutsche Bank, Citigroup and RBS for their alleged role in processing and financing the credits. The traders claim they've lost tens of millions of pounds as a result.

In its suit against Tradition Financial Services, Bilta says it sold 7.2 million allowances between May 2009 and July 17, 2009, leading to 60 chains of transactions in which TFS was involved. Tradition has said its role was limited and has denied any wrongdoing,

At Friday's hearing, a lawyer for the traders, Christopher Parker QC, urged the court to press ahead with the original date. The courts have arranged "COVID[-19] secure" facilities, and specifically addressed the new variant of the virus in their preparations.

"The risk hasn't changed," Parker said. "They should still be expected to come to court."

But the judge hearing the case, Marcus Smith, appeared to question the wisdom of forcing defendants to attend in person. While precautions have been taken by building operators, the new variant, which is said to be more transmittable, presented an "enhanced risk."

The judge mentioned a colleague shielding because of an elderly family member who nevertheless caught the virus. The judge is expected to make a ruling Monday.

Bilta and the other claimants are represented by Christopher Parker QC of Maitland Chambers. Complete counsel information wasn't available.

TFS is represented by David Scorey QC.

The case is Bilta (UK) Ltd. (in liquidation) and others v. SVS Securities Ltd. and others, case number FL-2016-000008, in the High Court of Justice of England and Wales.

--Additional reporting by Bonnie Eslinger. Editing by Alyssa Miller.

Correction: A previous version of this story wrongly stated counsel for TFS. That error has been corrected. 

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