Deutsche Bank to U.S. Justice Department: Was that wrong? Shouldn't I have done that? I didn't know that sort of thing was frowned upon. http://www.bloomberg.com/news/2010-...6-million-to-settle-u-s-tax-shelter-case.html Deutsche Bank AG, Germanyâs largest bank, admitted criminal wrongdoing and agreed to pay $553.6 million to avoid prosecution in the U.S. over fraudulent tax shelters that generated $29 billion in âbogusâ tax losses. The U.S. Justice Department, under an agreement yesterday, wonât prosecute the Frankfurt-based bank for fraud or tax evasion for enabling wealthy U.S. citizens to avoid $5.9 billion in taxes, after the bank admitted criminal wrongdoing. The settlement includes a $149 million civil penalty, the fees that Deutsche Bank generated from the shelters, and the taxes and penalties the Internal Revenue Service was unable to collect from taxpayers because of the misconduct, according to the agreement. From 1996 to 2002, âDeutsche Bank assisted high net worth United States citizens, who, through 2005, reported approximately $29.3 billion in bogus tax benefits on their tax returns,â according to the agreement. âDB acknowledges that it was wrong and unlawful to have engaged in these transactions and regrets having done so.â The settlement stems from a U.S. probe into illegal tax shelters sold by accounting firm KPMG LLP. The U.S. previously brought criminal charges against former KPMG executives. Charges against New York-based KPMG, one of the Big Four firms, were dismissed in January 2007 after the firm paid a $456 million fine. HVB Group agreed to pay $29.6 million to avoid prosecution on charges the Munich-based bank helped KPMG LLP sell shelters. âAppropriate Provisionsâ As part of yesterdayâs settlement, Deutsche Bank agreed to the appointment of an independent expert to ensure the bank doesnât use transactions to defraud the IRS again, according to the agreement. The overseerâs term will run for at least one year. âThe bank has previously taken appropriate provisions for the full amount of the fine, so the payment will not have any impact on current net income,â the bank said in a statement. âDeutsche Bank is pleased that this investigation, which concerned transactions that ceased more than eight years ago, has come to a resolution.â Deutsche Bank admitted that it participated in 15 different shelters, including transactions called âBLPS,â âFLIPâ and âHOMER,â in at least 1,300 deals for over 2,100 customers. As part of the agreement, Deutsche Bank admitted that it knew or should have known that its participation in the deals was meant to create the appearance of legitimate investment activity, even though their âprimary purposeâ was to avoid taxes. The bank also said it knew that documents falsely describing the transactions would be used by taxpayers and promoters of the shelters. Cooperation Deutsche Bank agreed that it would continue to cooperate with the government, provide records, and alert prosecutors to related criminal activity it uncovers. The agreement bans Deutsche Bank from participating in âpre-packaged tax products,â which U.S. Attorney Preet Bharara said âwere the type of tax sheltersâ previously offered by the bank. Should the bank violate the agreement, the Justice Department may prosecute the bank or extend the tenure of the independent expert. Federal prosecutors in New York have brought criminal cases against numerous executives since 2005. The government initially accused 17 ex-KPMG executives, only to see charges against 13 of them dismissed once a judge ruled that prosecutors violated their right to counsel. Three were convicted at a trial, one was acquitted, and others who were later charged pleaded guilty. The U.S. crackdown on illegal tax shelters also targeted Jenkens & Gilchrist, a Dallas-based law firm that once had 600 lawyers and which shut down after agreeing to pay millions of dollars to avoid prosecution for selling phony tax shelters. Executives at accounting firms BDO Seidman and Ernst & Young were also convicted of selling illegal shelters to wealthy clients. To contact the reporters on this story: David Glovin in New York federal court at firstname.lastname@example.org; Bob Van Voris in New York at email@example.com; David Voreacos in Newark, New Jersey, at firstname.lastname@example.org. To contact the editor responsible for this story: David E. Rovella at email@example.com.