Prosecutors are looking into Deutsche Bank's role in providing a lesser-known questionably tax shelter sold through a Silicon Valley firm, according to published reports.
The criminal investigation of Deutsche Bank covers several types of shelters, but has been focused on a scheme known as Cards in recent months. The shelter, which prosecutors say generated improper tax losses, was sold through a California investment firm formerly known at MyCFO.com and founded in the late 1990s by Netscape Communications founder James H. Clark.
Former MyCFO client Neal Douglas and his wife sued the Internal Revenue Service in 2003 after the agency disallowed their use of a $68 million Cards shelter. This spring, federal prosecutors asked the judge to stay the lawsuit to pending the outcome of the trial against 19 former KPMG tax professionals who sold questionable shelters, including Flip, Blips, Opis and SOS.
According to court documents, more than 60 Cards shelters were allegedly sold from 1999 to 2002, nearly two dozen of by Deutsche Bank, generating tax losses well over $1.5 billion.
Cards stands for custom adjustable-rate debt structure. It involves using bank loans to generate paper capital losses that offset real gains in taxable income.
Previously on WebCPA:KPMG Receives Critical PCAOB Inspection; Agrees to Tax Shelter Payout (Oct. 3, 2005)
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