Deutsche Bank is in talks with the Justice Department in an effort to settle a criminal investigation over the bank's role in questionable tax shelters, people briefed on the case say. This month, a smaller German rival, the HVB Group, reached a nearly $30 million agreement with prosecutors while acknowledging "criminal wrongdoing" in helping to carry out fraudulent tax shelter transactions. [blogged here]
For Deutsche Bank, the path toward a settlement may be rockier, in part because it had a much larger role in the creation of some questionable tax shelters and the transactions underpinning them, investigators have said. A potentially larger obstacle, say the people briefed on the case, is that Deutsche Bank appears unable to account for a number of those transactions....
The investigation of Deutsche Bank is the second major prong of a rapidly widening investigation into the accounting firms, law firms, banks and investment firms that worked together to sell sham shelters in recent years. Last August, KPMG, one of the nation's largest accounting firms, avoided a criminal indictment over four questionable shelters by reaching a $456 million deferred-prosecution deal with federal prosecutors in Manhattan.
A 2003 report by the Senate Permanent Subcommittee on Investigations [blogged here] directly quoted a March 2000 internal e-mail message from Jeffrey Eischeid, then a senior KPMG tax partner, in which Mr. Eischeid wrote that he could not describe Deutsche Bank's loans to investors for blips as "consistent with industry standards." Mr. Eischeid is one of 17 former KPMG employees who have been indicted on charges of defrauding the Internal Revenue Service. Their trial is scheduled to start in September. According to the Senate report, Deutsche Bank participated in 56 blips transactions in 1999 with KPMG and Presidio Advisors, an investment firm that the government contends in court filings is a promoter of abusive tax shelters. For the shelters, the bank provided loans to KPMG clients totaling $7.8 billion. It earned fees of $44 million for the loans and trades in the shelters.