Germany's biggest lender, Deutsche Bank, has agreed to pay a fine of close to a hundred million dollars to settle a fraud case in connection with the bank's use of a US shell company to avoid paying taxes.
Preet Bharara, the US attorney for the Southern District of New York, announced Wednesday that Deutsche Bank had admitted to its actions designed to avoid taxes and agreed to pay $95 million (89.8 million euros) to the United States to account for this conduct.
Germany's biggest bank had used a "web of shell companies and calculated transactions" to try to evade paying tens of millions of dollars in taxes, Bharara added in the statement.
The case dates back to 2000 when Deutsche Bank acquired US holding company, Charter, which had stock holdings in pharmaceutical company Bristol-Myers Squibb (BMY).
To avoid paying high taxes on the gain from the sale of the stock, Deutsche Bank was 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 then 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.
The settlement was the latest by the German lender in its efforts to close hundreds of lawsuits resulting from past wrongdoings, especially during the 2008/2009 financial crisis. Last month, it agreed to pay $7.2 billion to settle probes into the sales of toxic mortgage-backed securities that contributed to what's become known as the US subprime crisis.
uhe/tb (AFP, Reuters)