Deutsche Bank AG, Germanys largest loan provider, is being sued by the US government over allegedly creating a network of underfunded shell companies to avoid paying US taxes.
On Monday the US attorney for the Southern District of New York filed a lawsuit seeking 190 million in taxes, penalties and interest. The lawsuit pointed at the no-longer functioning BMY as a main accomplice to Deutsche Bank and First Union National Bank, which was acquired by Wells Fargo and renamed.
Allegedly BMY set up three shell companies, BMY Acquisition Corp., BMY Acquisition LLC and BMY Statutory Trust, during 1999 and 2000 with the sole purpose of executing “a series of pre-planned transactions” in order to avoid tax liabilities. While First Union acted as the trustee for BMY.
“These shell corporations collectively served as an underfunded special-purpose vehicle with no function other than to be stuck with a tax bill that it could never pay,” the Manhattan US attorney said in a statement. “This was nothing more than a shell game.”
According to the lawsuit, in 1999 Deutsche Bank purchased a company that had a stake in Bristol-Myers. However, the sale of the stock would have forced the German bank to pay tax over the $100 million profit it would have made from the deal.
Instead, the bank allegedly went into an agreement with a firm to sell the stock to the created shell companies in an undervalued deal, which was funded by short-term loans.
The shell companies sold the stock to a different Deutsche Bank entity, triggering the tax liabilities and only then repaying the short-term loans, leaving themselves with no funds to pay taxes.
“We fully addressed the governments 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,” Deutsche Bank said in a statement.
“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.”
Deutsche Bank AG lost 1.23% on Monday and an additional 3.24% on Tuesday to trade at €25.66 at 12:48 GMT, marking a one-year decrease of 20.95%. The company is valued at €36.58 billion. According to the Financial Times, the 30 analysts offering 12-month price targets for have a median target of €30.50, with a high estimate of €38.20 and a low estimate of €23.70. The median estimate represents a 15.01% increase from the last close price of €26.52.
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