Deutsche Bank Settles Liability for Enabling Bullshit Tax Shelter -- A Midco Variation (1/5/17)

I previously reported on one of Deutsche Bank's bullshit tax shelter adventures.  Deutsche Bank's Amazing Magnificent Adventure -- Again -- into the Land of Bullshit Tax Shelters (Federal Tax Crimes Blog 10/3/15), here.  That blog reported on Judge Kaplan's rejection of DB's motion to dismiss the case filed by the Government with respect to the bullshit tax shelter -- a variation on the Midco shelter theme.  The case has now been resolved.  See Settlement and Dismissal Order here.  The key facts, which DB admits in the settlement document, are covered in the prior blog, so I won't repeat them here.  Suffice it to say that DB admits that it participated knowingly in a scheme to avoid payment of taxes.

The settlement requires DB to pay $95 million.  The settlement does not state how that figure was derived.  I could speculate but I suspect there would be a high chance that my speculation would be misfocused.

The agreement says that the following claims of the U.S. are not released:

a.  Any claim for conduct other than the Covered Conduct.

b.  "Any criminal liability."

c.  A broad swath of potential liability in a paragraph that I am not sure I understand the full scope of (so I quote that paragraph, ¶ 5.c.):

Except as expressly stated in this Stipulation, any administrative liability (other than (i) the collection, assessment, or adjustment of any income tax,  including any interest thereon and any penalties for failure to report or failure to pay such income tax, arising from the Covered Conduct and (ii) BMY's unpaid tax liability, including any interest thereon and any penalties for failure to report or failure to pay such income tax, resulting from the sale of the Bristol-Myers shares), including the suspension and debarment rights of any federal agency;

The settlement further states (¶ 7):

7. Deutsche Bank waives and will not assert any defenses it may have to any criminal prosecution or administrative action relating to the Covered Conduct that may be based in whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment of the United States Constitution, or  under the Excessive Fines Clause in the Eighth Amendment of the United States Constitution, this Stipulation bars a remedy sought in such criminal prosecution or administrative action.

JAT Comments:

1.  The Covered Conduct sounds like tax evasion and, likely some other tax related criminal conduct such as conspiracy (offense or defraud) and tax perjury.  There may be a back story that I am not familiar with, but as noted above the settlement does state cryptically that DB is not released from "Any criminal liability." (¶ 5.a.; see also ¶ 7, both quoted above).  The Covered Conduct occurred for the target corporation's fye 4/20/01, so the criminal statute of limitations probably would have expired unless DB did something to refresh the statute of limitations (a la United States v. Beacon Brass Co., Inc., 344 U.S. 43 (1952)) or to suspend the statute while it was otherwise open (such as by consent).  One inference (probably not compelled) is that there is a criminal case that could still be pursued.  Still, the civil liabilities are usually not concluded until any criminal investigation or prosecution is concluded.

2.  Even beyond possible criminal prosecution, as I indicated, I am not sure exactly what paragraph 7 is getting at.  The parties reaching the settlement certainly know what potential conduct it covers.