German financial giant Deutsche Bank faces two lawsuits from investors, who were sold tax shelters that the Internal Revenue Service declared invalid in August 2000.
The tax shelters in question are known as Cobra, which stands for currency options bring reward alternatives, and MLA, which stands for market-linked deposit. The two shelters are nearly identical, the New York Times reported. The plaintiffs in both cases owe the federal government tens of millions of dollars and seek to recover fees, interest and penalties, the Times reported.
In the case of Cobra or Cobra Swaps, Robert L. Baron, a wealthy California technology executive, filed suit accusing Deutsche Bank and three employees of continuing to push the shelters even after the IRS had banned them. Baron's suit, which has 12 plaintiffs, also accuses American Express of deliberately preparing for some plaintiffs, including for Barron, false tax returns that incorporated illegal tax breaks generated by shelters, the Times reported.
A Deutsche Bank spokeswoman, Rohini Pragasam, told the Times on Monday that the bank had no comment on the lawsuits. An American Express spokesman, Tony Mitchell, told the Times Monday that in the case of the Barron lawsuit, "we do not believe there is any basis for this complaint."
In the case of the MLD tax shelters, suit was filed in the Southern District Court of New York claiming that Deutsche Bank "created a tax shelter machine" by recruiting small law and accounting firms to help it sell the questionable MLD tax shelter, the Times reported.
Besides Deutsche Bank and three of its employees, the second suit includes as defendants a law firm known as Cantley & Sedacca, which is defunct; and Pasquale & Bowers, an accounting firm in Syracuse that has since merged with Dermody, Burke & Brown, another Syracuse accounting firm, the Times reported.
Dallas-based attorney David Deary, who filed both complaints, declined to comment Monday, the Times reported.