Deutsche Bank orchestrated a complex tax dodge scheme in 2000, using shell companies and pre-planned financial maneuvers to shift a $52 million tax bill onto a phantom entity unable to pay. The Southern District of New York has now nailed the German banking giant with a $95 million civil settlement, forcing the bank to admit its role in a fraudulent conveyance designed solely to avoid federal income taxes.
U.S. Attorney Preet Bharara didn’t mince words: “Using a web of shell companies and series of calculated transactions, Deutsche Bank sought to escape liability for tens of millions of dollars in taxes.” The government’s case centers on the acquisition of a corporation holding stock with a rock-bottom cost basis. Selling it outright would trigger massive tax consequences—so Deutsche Bank crafted a workaround with a tax shelter promoter instead.
The scheme, known as the “May 2000 Transaction,” involved transferring the shares to a shell company called BMY, which then “sold” them back in a way that left BMY on the hook for the tax. But BMY had no real assets—by design. Deutsche Bank structured the entire deal knowing the shell would be left insolvent, unable to cover the more than $52 million in taxes, interest, and penalties that followed.
In its settlement agreement approved by Manhattan federal court, Deutsche Bank “admits, acknowledges, and accepts responsibility for” key facts. Specifically, the bank confirms it engaged in the May 2000 Transaction “in order to avoid having to pay the built-in tax liability.” Every move was premeditated. BMY booked massive taxable gains, but Deutsche Bank knew—or should have known—BMY had no legitimate losses to offset them.
Yet BMY still claimed to the IRS that no tax was due, citing fake foreign currency losses from a notorious tax shelter known as COINS—Currency Option Investment Strategy. Deutsche Bank itself had participated in COINS, and in a 2010 non-prosecution deal with federal prosecutors, admitted it “willfully and knowingly” took part in what it knew was a fraudulent and unlawful tax shelter.
The IRS shut down the claims and assessed BMY the full tax burden. Now, after years of legal pursuit, the U.S. government has forced Deutsche Bank to pay $95 million to resolve the civil case. No criminal charges were filed in this action, but the admission of guilt and steep price tag underscore the reach of federal authorities in cracking down on sophisticated financial fraud.
Related Federal Cases
Key Facts
- State: New York
- Agency: DOJ USAO
- Category: Fraud & Financial Crimes
- Source: Official Source ↗
🔒 Get the grimiest stories delivered weekly. Subscribe free →
Browse More
MORE FEDERAL CRIME NEWS
US NewsUS NewsUS NewsUS News