The United States Attorney for the Southern District of New York, announced that the United States has filed a lawsuit against DEUTSCHE BANK, A.G., DB U.S. FINANCIAL MARKETS HOLDING CORP., DEUTSCHE BANK SECURITIES, INC., BMY ACQUISITION CORP., BMY ACQUISITION LLC, BMY STATUTORY TRUST, and FIRST UNION NATIONAL BANK, now known as WELLS FARGO BANK, N.A., as trustee of BMY STATUTORY TRUST, alleging that these parties participated in a series of transactions that amounted to fraudulent conveyances done with the purpose of evading taxes.The lawsuit seeks to recover those funds, along with appropriate penalties and interest.
The suit seeks to hold Deutsche Bank and the other defendants liable for $190 million in taxes, penalties, and interest owed to the United States taxpayers.
The allegations are that Deutsche Bank entered into an arrangement with a firm that created three shell companies: defendants BMY Acquisition Corp. (“BMY Corp.”), BMY Acquisition LLC (“BMY LLC”), and BMY Statutory Trust (“BMY Trust”) and, collectively with BMY Corp. and BMY LLC, “BMY”). These shell corporations collectively served as an underfunded special-purpose vehicle with no function other than to be stuck with a tax bill that it could never pay.
The Complaint asserts that a plan first had a Deutsche Bank entity sell the corporation holding the appreciated stock to BMY for a price that did not represent fair value for it in light of, at a minimum, the tens of millions of dollars of tax liabilities on the built-in gains. BMY paid for the stock using a short-term loan conditioned on the completion of the pre-planned transaction. After purchasing the stock, BMY sold it to a different Deutsche Bank entity. At sale, the tax liability on the built-in gains of the stock was triggered on the part of BMY. BMY then paid back its loan and other expenses, leaving it with insufficient funds to pay the tax liability. Deutsche Bank profited from this transaction by selling the stock with a stepped-up cost basis and without paying the resulting tax liability.
The Internal Revenue Service (“IRS”) has determined that as a result of these transactions the current unpaid federal tax liability, with penalties and interest that resided with the BMY shell company, is greater than $190 million. Penalties and interest would multiply that amount.
Jeffrey Newman represents whistleblowers
