|Deutsche Bank to pay over $550M in fraud probe
Deutsche Bank agrees to pay $550 million to resolve federal tax shelter fraud investigation
Associated Press | December 21, 2010
NEW YORK (AP) -- Deutsche Bank admitted criminal wrongdoing and agreed to pay more than $550 million in connection with its participation in tax shelters that enabled the rich to temporarily avoid paying hundreds of millions of dollars in U.S. taxes, authorities announced Tuesday.
Federal prosecutors and the Justice Department's tax division announced the deal, saying a nonprosecution agreement requires the bank to continue cooperating and to submit to the appointment of an independent expert who will review its compliance measures and ensure it does not help people dodge taxes in the future.
Authorities said the $533,633,153 payment by the bank will include that amount of taxes and interest that the Internal Revenue Service was unable to collect from taxpayers from 1996 to 2002 because of the misconduct. It also includes a civil penalty of more than $149 million.
In a statement, Deutsche Bank said it was pleased that the investigation had been resolved.
"Since 2002, the bank has significantly strengthened its policies and procedures as part of an ongoing effort to ensure strict adherence to the law and the highest standards of ethical conduct," it said. The bank said the payment had already been accounted for and would not have any impact on current net income.
Bank spokesman John Gallagher said the company had no additional comment.
U.S. Attorney Preet Bharara said in a news release that the bank provided a detailed statement of facts describing its wrongful conduct.
The nonprosecution agreement bars the bank from involvement with any prepackaged tax products of the type the bank had previously offered, according to the release.
In court papers, the Department of Justice agreed not to criminally prosecute Deutsche Bank for any crimes related to its participation in a broad conspiracy to defraud the Internal Revenue Service.
Authorities said the scheme enabled wealthy U.S. citizens from 1996 through 2005 to evade about $5.9 billion in individual income taxes on capital gains and ordinary income. The court papers said they dodged taxes by claiming $29.3 billion in bogus tax benefits that enabled them to claim losses that did not really exist.
The government said Deutsche Bank participated in about 15 different tax shelters, working 1,300 deals involving more than 2,100 customers.
Some tax shelters were supported by an opinion letter in which accounting giant KPMG and a law firm represented that the customers' tax position would "more likely than not" withstand IRS challenge, the government said.
KPMG LLP reached its own deal with the government admitting its role in the tax-shelter scheme. The firm avoided criminal prosecution by cooperating with authorities and was fined $456 million, including $128 million in forfeited fees from sales of the shelters.