Germany: Deutsche Bank, Germany’s biggest bank, has agreed to pay $95 million to settle a tax fraud case brought by the US Justice Department, the federal prosecutor in charge has announced.
Preet Bharara, the US attorney for the Southern District of New York, said Deutsche Bank used a “web of shell companies and calculated transactions” to try to evade paying tens of millions of dollars in taxes.
The US government “has made Deutsche Bank admit to its actions designed to avoid taxes and pay $95 million to the United States to account for this conduct,” the prosecutor said in a statement Wednesday.
The case dates back to 2000 with Deutsche Bank’s acquisition of a US holding company, Charter, which had stock in Bristol-Myers Squibb, the pharmaceutical company.
To avoid paying high taxes on the gain from the sale of the stock, Deutsche Bank is alleged to have arranged to sell it to a shell company, and then to buy it back.
The transaction cleansed Deutsche Bank’s gain, sticking the shell company with the $52 million tax bill.
The shell company, BMY, tried to offset its gain with foreign currency losses, but US tax authorities concluded the losses were from a fraudulent tax shelter that Deutsche Bank also was involved in.
Under the settlement, the German bank admitted the transaction was “pre-planned” and that it was designed to avoid the tax liability associated with the stock.
It knew the shell company had no material assets and no operating business, and so could not pay the taxes resulting from the stock sale.
It was the latest move by Deutsche Bank to settle pending court cases in the United States.
Last month, it agreed to pay $7.2 billion to settle probes into the sales of toxic mortgage bonds that contributed to the 2008 financial crisis.