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German bank pays $554 million to avert US prosecution

23 December 2010

German-owned Deutsche Bank has admitted helping American clients use illegal tax shelters.

The bank has agreed to pay the US government more than half a billion dollars in a settlement to avoid prosecution. Its activities - which it admits amounted to criminal offences -  generated $29 billion in fake tax losses, according to the US Department of Justice.

The $553,633,153 penalty was calculated by adding up fees charged by Deutsche Bank to the 2,100 clients involved; the amount of taxes and interest the US Internal Revenue Service was unable to collect from taxpayers as a result; plus a $149 million civil penalty.

Deutsche Bank has also had to promise to cooperate with the investigation for as long as it lasts, which will probably mean divulging the names of all relevant clients. It has also had to agree never again to offer any pre-packaged tax shelter products.

The DoJ has appointed an "independent" expert to to scrutinise and correct the bank's internal compliance procedures. The bank must accept his recommendations or risk prosecution.

The tax offences admitted by Deutsche Bank go back to 1996-2002, and cash has already been set aside in its accounts to pay for the settlement. Some of the offences are linked to KPMG, which paid the DoJ $456 million in 2005 to settle similar tax shelter charges.

Two KPMG employees went to prison as a result. Two Deutsche Bank employees are also coming up for trial in New York City in February.

 

Sources

 

US Department of Justice (PDF file)

Reuters

New York Times

Deutsche Welle (in English)

 

 

 


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