FRANKFURT - Deutsche Bank has agreed to pay US$95 million (S$137.2 million) to settle US claims that it used underfunded shell companies to evade taxes, the second time since 2010 that it has resolved a government tax case.
The United States sued the bank in 2014 after its 1999 purchase of a company that held stock whose sale would trigger more than US$100 million in taxable gains. The US government sought US$190 million, claiming the bank structured a deal with shell companies to avoid paying the taxes.
"We are pleased to resolve this claim and put these events from more than 16 years ago behind us," spokesman Amanda Williams said on Wednesday (Jan 4). The settlement comes as Deutsche Bank and other lenders seek to wrap up legal issues before President-elect Donald Trump takes office.
Last month, the German bank agreed to pay US$7.2 billion to resolve a US probe into its sale of the toxic debt that fuelled the financial crisis.
It is supposed to give relief to sub-prime mortgage borrowers as part of this settlement and is considering meeting that requirement by lending money to private equity firms and hedge funds, said persons with knowledge of the matter.
Other banks that have settled with the US in the toxic debt case have bought loans or received credit for modifying loans they made themselves, even if they no longer owned them.
Deutsche Bank is Mr Trump's biggest lender, owning about half of the billionaire's outstanding debt in loans tied to his hotel in Washington and a Miami golf resort.
In a separate case in 2010, Deutsche Bank admitted criminal wrongdoing and agreed to pay US$553.6 million to avoid prosecution in the US over fraudulent tax shelters that generated US$29 billion in bogus losses. The US agreed that it would not prosecute the bank for fraud or tax evasion for enabling wealthy US citizens to avoid US$5.9 billion in taxes.
That settlement included a US$149 million civil penalty, the fees 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.
In the latest case, a shell company served as an underfunded special-purpose vehicle "with no function other than to be stuck with a tax bill that it could never pay", according to court papers.
Both cases were brought by US Attorney Preet Bharara in New York.