A $90 Billion Danish Fund Refuses to Do Deals With Macquarie

(Bloomberg) -- PFA, which oversees about $90 billion in assets, is refusing to enter new deals with Macquarie Group Ltd. amid a national campaign in Denmark to fight financial misconduct.

Macquarie is one of a number of banks being investigated by German authorities in connection with alleged dividend tax fraud. In November, Danish Tax Minister Karsten Lauritzen said his country was also looking at the Australian firm’s conduct. That came amid a broader crackdown on tax fraud in Denmark after offshore financiers stole almost $2 billion from state coffers in a fraudulent rebate scheme.

“Before we see a settlement on this and can see a stronger commitment from them on a new way of conducting business, we cannot do new business,” Allan Polack, the chief executive officer of Copenhagen-based PFA, said in a phone interview.

“It has not been totally settled yet. So we have to come up with what Macquarie will do going forward,” he said. “But right now, they are on stand-by. That’s for sure.”

The comments follow earlier criticism from PFA, which has referred to Macquarie’s involvement “in dividend withholding tax fraud” as conduct that is “completely unacceptable” and that, “at PFA, we strongly dissociate ourselves from.”

A Macquarie spokeswoman declined to comment and referred to the company’s tax policy.

The Battle Intensifies

On Monday, fresh data showed that the number of corporate bankruptcies soared in Denmark last month as the authorities crack down on fake businesses created as fronts for criminal activity. The development underlines the seriousness with which Europe now views such fraudulent practices. Denmark is particularly keen to ensure its defenses against white-collar crime are iron-clad after its biggest financial group, Danske Bank A/S, became engulfed in a vast Estonian money laundering scandal.

ATP, Denmark’s biggest pension fund with about $120 billion in assets, decided late last year to freeze all future investments with Macquarie pending the outcome of investigations. The move interrupts years of cooperation in which Macquarie had partnered with Danish pension funds in some of their biggest infrastructure deals. As recently as 2018, ATP and PFA teamed up with Macquarie to buy Danish phone company TDC A/S. Before that, the firm was involved in the acquisition of Denmark’s main airport.

ATP’s interim CEO, Bo Foged, said in an interview last week that his fund is in “an ongoing dialog” with Macquarie. The Australian firm is still in “what we consider a self-cleaning process,” he said. As things stand now, ATP is “still not able to do new investments with Macquarie,” he said.

Denmark’s fraught relationship with Macquarie follows similar controversies in which voters have voiced anger at Wall Street giants buying stakes in public utilities. In 2014, a sitting coalition government was split as one party walked out in protest over a decision to let Goldman Sachs buy a stake in energy company Dong (which has since changed its name to Orsted and now focuses on renewable energy.)

Read More Here: Denmark Bans Private Equity Takeovers of Key Infrastructure

One of the criteria that ATP uses to decide which firms to partner with when it does deals is taxation. In a review of its 2018 investments, it singled out “aggressive tax planning” as a challenge, because national laws and regulations haven’t kept pace with globalization. That’s enabled investors to exploit loopholes.

ATP itself parted ways with its chief executive officer in November after he became embroiled in a media storm for his role a decade ago at Nordea, where he oversaw a unit that allegedly took advantage of tax loopholes.

Inflating returns by taking advantage of legal loopholes “is basically a violation of our tax policy,” said Foged, ATP’s acting CEO. “It’s important for us to have partners that are actually following the law and want to be transparent about things that they do.”

German authorities investigating the allegations have narrowed down the number of “persons of interest” at Macquarie to 22 past and present employees, CEO Shemara Wikramanayake said at a February briefing. Those 22 people included herself and her predecessor.

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