NEW YORK (Reuters) - The U.S. government on Monday sued Deutsche Bank AG DBKGn.DE, seeking to recoup more than $190 million from the German bank over alleged tax fraud more than 14 years ago.
According to a complaint filed in the U.S. 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.
U.S. Attorney Preet Bharara said the case arose from Deutsche Bank’s late 1999 purchase of a corporation that was sitting on an unrealized $150 million gain in shares of drug maker Bristol-Myers Squibb Co BMY.N.
The government said that to avoid a potential $51 million of federal income taxes on the gain, Deutsche Bank in 2000 sold the stock for below fair value to the shell companies, which paid for them with short-term loans.
These shell companies in turn sold the stock to a different Deutsche Bank entity, triggering the tax liability, only to then repay the loans, leaving them without funds to pay taxes.
“Through fraudulent conveyances involving shell companies, Deutsche Bank tried to make its potential tax liabilities disappear,” Bharara said in a statement. “This was nothing more than a shell game.”
The $190 million sought includes the alleged unpaid taxes, penalties and interest.
In a statement, Deutsche Bank spokeswoman Renee Calabro said the bank “fully addressed” the matter in a 2009 agreement with the IRS, in which the government had “abandoned” the theory that the bank was liable for the taxes.
“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,” she said.
Wells Fargo Bank NA WFC.N, whose predecessor First Union National Bank was trustee for a trust set up for the transactions, was also named as a defendant in that capacity. A spokesman, Ancel Martinez, declined to comment.
The case is U.S. v Deutsche Bank AG et al, U.S. District Court, Southern District of New York, No. 14-09669.
Reporting by Jonathan Stempel in New York; Editing by Andre Grenon and Diane Craft