“DEUTSCHE BANK ADMITS CRIMINAL ACTS”
FROM THE -
JOURNALS of Monte Friesner ~ Friday December 24, 2010 >
Financial Crime Consultant for WANTED SA >
WANTED SA has learned this morning that Deutsche Bank admitted criminal wrongdoing for taking part in fraudulent tax shelters that let clients hide billions of dollars, and agreed to pay $553.6 million to settle the case, federal prosecutors said on Tuesday.
Deutsche Bank, Germany's flagship lender and a major international bank, said it had already set aside money to cover the fine and that it will not affect profits.
The settlement is part of a larger U.S. government effort to crack down on banks that help wealthy Americans evade taxes. Prosecutors last year settled with Swiss bank UBS, which paid $780 million in fines for helping clients with roughly $20 billion in assets hide their accounts from the U.S. Internal Revenue Service.
Leads from the UBS case are pointing investigators to potential criminal behavior by other banks in Asia and the Middle East, the head of the IRS said earlier this month.
The IRS has also offered amnesty to wealthy people who declared their assets, and is now using information from some of those taxpayers to build cases against other banks that facilitate tax evasion.
Prosecutors are already moving forward with a probe of clients at Europe's largest bank, HSBC Holdings, some of whom received a letter in June notifying them they are the subject of a criminal probe.
The U.S. Attorney's Office in Manhattan said the Deutsche Bank fine represents the fees the bank earned setting up tax shelters, the taxes and interest the IRS could not collect because of the bank's conduct and a civil penalty of some $149.8 million.
Some of the shelters are linked to accounting firm KPMG, which reached a $456 million settlement with the government in 2005 to avoid prosecution on charges it helped wealthy clients set up questionable tax shelters. Two former KPMG officials went to prison.
A HOMERIC SHELTER
The shelters in question, with elaborate acronymic names like BLIPS, COBRA, HOMER and POPS LITE, were set up between 1996 and 2002. The government said they allowed high net worth individuals to avoid some $5.9 billion in U.S. income taxes.
More than 2,100 customers were involved, according to the non-prosecution agreement the bank signed. That deal includes the appointment of an independent monitor to oversee the bank's compliance with tax laws.
The U.S. Attorney's Office said Bart Schwartz, chairman of private investigator Guidepost Solutions and former chief of the office's criminal division, would serve as the monitor.
The agreement will last at least two years.
Even as they settle with the banks that set up tax shelters, federal prosecutors remain in hot pursuit of the bankers that worked on them and the clients that used them.
Last week they charged a former UBS banker with encouraging American clients not to disclose their offshore accounts to tax authorities, and in November they extracted a guilty plea from a former UBS client in New Jersey who hid money from tax authorities in a Swiss account.
In October two HSBC clients were convicted of failing to report millions in taxable income to the IRS and hiding it at HSBC in Switzerland.
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