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August 19, 2005
The Banks and KPMG
Following on this post from last week regarding a plea deal of a former banker who had promoted KPMG's tax shelters, this Wall Street Journal ($) article provides more information on the involvement of several banks -- namely UBS AG, Deutsche Bank AG and HVB Group -- in providing billions of dollars in credit lines to KPMG clients -- and, in turn, earning substantial bank fees -- in connection with KPMG's promotions of tax shelters to its clients.
According to the WSJ article, Deutsche Bank, which happens to be a KPMG audit client, earned almost $80 million in bank fees from the Opis and Blips transactions that are at the heart of the questionable tax shelter vehicles. HVB, which is also a KPMG audit client, earned 5.5 million on Blips transactions in just three months during 1999 and millions more in 2000. UBS participated in 100 to 150 transactions in 1997-1998, but the amount of UBS' fees are unclear.
Interestingly, the article points out that Deutsche Bank lawyers cautioned the company's bankers that Blips transactions posed substantial risks for the bank's reputation. Nevertheless, the CEO of Deutsche Bank's U.S. unit at the time approved the bank's participation in the transactions so long as "any customer found to be in litigation be excluded from the product . . . and that a low profile be kept on these transactions."
I think it's safe to say that the low profile has been blown.
Posted by Tom at August 19, 2005 05:17 AM
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