Department of Justice Lawsuit Claims Deutsche Bank Created 'Shell Companies' To Engage In US Tax Fraud

Germany’s Deutsche Bank, already awash in lawsuits, can add another legal fight to its plate. The U.S. government on Monday said it is suing the Frankfurt bank for committing federal tax fraud, according to news reports.

The Department of Justice lawsuit, which also names Wells Fargo, seeks more than $190 million in taxes, penalties and interest, U.S. Attorney Preet Bharara in Manhattan said. He accused Deutsche bank of creating an elaborate scheme in 1999 to avoid paying the bill on over $100 million in federal taxes.

“Through fraudulent conveyances involving shell companies, Deutsche Bank tried to make its potential tax liabilities disappear,” Bharara said. “This was nothing more than a shell game.”

Deutsche Bank is already facing around 1,000 major lawsuits in the wake of the global financial crisis, Stefan Krause, the bank’s finance chief, said at a May meeting. The financial giant is also accused of manipulating benchmark interest rates, engaging in questionable foreign currency trading and carrying out financial transactions on behalf of nations under embargo, such as Iran and Sudan. The German bank said in October it has so far set aside about 3 billion euros ($3.7 billion) to cover the costs of investigations and legal suits, many of which relate to the toxic mortgage-backed securities sold by its U.S. unit.

In response to news of the U.S. lawsuit, a spokeswoman for Deutsche Bank said the company plans to defend itself against the charges. She argued that the bank had already resolved the issue with the federal officials.

“We fully addressed the government’s concerns about this 14-year-old transaction in a 2009 agreement with the IRS,” the spokeswoman said, The Hill reported. “In connection with that agreement, they abandoned their theory that DB was liable for these taxes, and while it is not clear to us why we are being pursued again for the same taxes, we plan to again defend vigorously against these claims.