Deutsche Bank Should Pay US Gov't $190 Million For Tax Fraud: Prosecutors

MOSCOW, December 9 (Sputnik), Ekaterina Blinova — The US government has sued Deutsche Bank AG, demanding that the bank pay more than $190 million over an alleged tax fraud case, which occurred 14 years ago.

"According to a complaint filed in the US District Court in Manhattan, Deutsche Bank used "insolvent" shell companies to conduct a series of fraudulent conveyances designed to hide taxable gains from the U.S. Internal Revenue Service," Reuters reported.

According to US Attorney Preet Bharara, the roots of the fraudulent scheme lie in 1999 when the bank purchased a corporation "that was sitting on an unrealized $150 million gain in shares of Bristol-Myers Squibb Co," a drug manufacturer. In order to avoid paying $51 million in taxes, Deutsche Bank sold the stock to three shell companies far below its fair price in 2000. The three firms paid for the stock with short-term loans. In their turn, the companies sold the stock to another Deutsche Bank entity, "triggering the tax liability, only to then repay the loans, leaving them without funds to pay taxes," Reuters reveals.

"Through fraudulent conveyances involving shell companies, Deutsche Bank tried to make its potential tax liabilities disappear. This was nothing more than a shell game," US Attorney Preet Bharara stated.

Thus far, the US Federal prosecutors claim that Deutsche Bank AG should pay the US government $190 million in unpaid taxes, penalties and interest. In response, the bank insists it reached an accord with the IRS over the same tax case in 2009.

"We fully addressed the government's concerns about this 14-year-old transaction in a 2009 agreement with the IRS. In connection with that agreement they abandoned their theory that DB was liable for these taxes, and while it is not clear to us why we are being pursued again for the same taxes, we plan to again defend vigorously against these claims," Renee Calabro, a spokeswoman in New York for Deutsche Bank, said as quoted by Bloomberg.

The media source points to the fact that in the period between 1996-2002 Deutsche Bank had also been involved in a "criminal wrongdoing," creating fraudulent schemes in order to help wealthy Americans avoid taxes. The bank acknowledged the case in 2010 and paid $554 million to avoid prosecution.