Deutsche Bank to pay $95 mln to end U.S. tax fraud case

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By Nate Raymond and Jonathan Stempel | NEW YORK

NEW YORK Deutsche Bank AG agreed to
pay $95 million to resolve a U.S. government lawsuit accusing
the German bank of tax fraud for using “insolvent” shell
companies to hide significant tax liabilities from the Internal
Revenue Service in 2000.

Under the accord described in papers filed on Wednesday with
the federal court in Manhattan, Deutsche Bank also admitted to
trying to stick the shell companies with the tax bill for its
then-new stake in drugmaker Bristol-Myers Squibb Co.

The settlement resolves a lawsuit filed in December 2014
that had sought to recoup more than $190 million in taxes,
penalties and interest.

“The government, through this action and settlement, has
made Deutsche Bank admit to its actions designed to avoid
taxes,” U.S. Attorney Preet Bharara in Manhattan said in a

Deutsche Bank spokeswoman Amanda Williams said in a
statement: “We are pleased to resolve this claim and put these
events from more than 16 years ago behind us.”

The settlement marks the latest step in Deutsche Bank’s bid
to resolve legal matters that in recent months caused investors
to worry about its future, and whether it had enough capital.

Last month, Deutsche Bank reached a $7.2 billion settlement
in principle to resolve a U.S. probe of its sale of toxic
mortgage securities.

The tax case arose from Deutsche Bank’s early 2000
acquisition of Charter Corp, which had been sitting on a large
unrealized gain in Bristol-Myers.

According to settlement papers, the bank in May 2000 sold
Charter to the shell companies, which then liquidated Charter
and sold the Bristol-Myers shares back to the bank, triggering a
more than $52 million tax liability.

But the shell companies lacked the funds to pay the taxes,
and Deutsche Bank admitted that it knew or should have known
this was the case, the papers said.

“Deutsche Bank engaged in the May 2000 transaction in order
to avoid having to pay the built-in tax liability,” the papers

The case is U.S. v Deutsche Bank AG et al, U.S. District
Court, Southern District of New York, No. 14-09669.

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