[NEW YORK] Deutsche Bank AG must face a US government lawsuit seeking to recoup more than US$190 million over an alleged tax fraud 15 years ago, after a federal judge on Thursday turned down the German's bank's request to dismiss the case.
US District Judge Lewis Kaplan in Manhattan rejected arguments that the government failed to state a legally sufficient claim, and waited several years too long to sue.
The government accused Deutsche Bank of using shell companies to avoid capital gains taxes on Bristol-Myers Squibb Co shares it acquired in late 1999, when it bought a company sitting on a large unrealized gain in the drugmaker.
Deutsche Bank spokeswoman Renee Calabro said "We plan to continue to vigorously defend ourselves against these allegations." In December, when the lawsuit was filed, the bank said it had fully addressed the matter in a 2009 agreement with the US Internal Revenue Service.
US Attorney Preet Bharara in Manhattan alleged that to avoid a potential US$51 million of taxes on the gain, Deutsche Bank in 2000 sold Bristol-Myers stock for below fair value to the shell companies, which paid for them with short-term loans.
He said these shell companies then sold the stock to another Deutsche Bank entity, triggering the tax liability, only to then repay the loans, leaving them unable to pay the taxes. The US$190 million figure includes penalties and interest.
In seeking a dismissal, Deutsche Bank said the transaction was not fraudulent, and that the lawsuit came "out of the blue"to recover taxes allegedly owed by an unrelated third party.
But Mr Kaplan said he was "satisfied that the complaint states legally sufficient claims with the pertinent level of particularity." The case is US v Deutsche Bank AG et al, US District Court, Southern District of New York, No 14-09669.