AIG Sues To Get $306 Million In Taxes BACK!

by Dollars and Sense

AIG gets $170 billion from taxpayers. Taxpayers now own 80% of the company. Company hands out hundreds of millions in bonuses. Congress and Treasury claim they had no idea and can't stop the payments. Congress announces new taxes to recover most egregious bonuses (e.g. million dollar "retention" payouts to people that have left). And now this. The company is suing the federal government to get $306 million it paid after being busted for illegal use of offshore tax shenanigans. A government-owned company is suing the government to get back tax money it paid for not paying its taxes, and is using taxpayer money to pay the lawyers.

My head hurts.

From the NYT:

While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.

A.I.G. sued the government last month in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company's financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

The lawsuit, filed on Feb. 27 in Federal District Court in Manhattan, details, among other things, certain tax-related dealings of the financial products unit, the once high-flying division that has been singled out for its role in A.I.G.'s financial crisis last fall. Other deals involved A.I.G. offshore entities whose function centers on executive compensation and include C. V. Starr & Company, a closely held concern controlled by Maurice R. Greenberg, A.I.G.'s former chairman, and the Starr International Company, a privately held enterprise incorporated in Panama, and commonly known as SICO.

The lawsuit contends in part that the federal government owes A.I.G. nearly $62 million in foreign tax credits related to eight foreign entities, with names like Lumagrove, Laperouse and Foppingadreef, that were set up or controlled by financial products, often through a unit known as Pinestead Holdings.

United States tax law allows American companies to claim a credit for any taxes paid to a foreign government. But the I.R.S. denied A.I.G.'s refund claims in 2008, saying that it had improperly calculated the credits. The I.R.S. has identified so-called foreign tax-credit generators as an area of abuse that it is increasingly monitoring.

The remainder of A.I.G.'s claim, for $244 million, concerns net operating loss carry-backs, capital loss carry-backs, a general refund claim and claims for refunds of other tax-related payments that A.I.G. says it made to the I.R.S. but are now owed back. The claim also covers $119 million in penalties and interest that A.I.G. says it is due back from the government.

In part, A.I.G. says it overpaid its federal income taxes after a 2004 accounting scandal that caused it to restate its financial records. A.I.G. says in part that it is entitled to a refund of $33 million that SICO paid in 1997 as compensation to employees, which it now says should be characterized as a deductible expense.

A.I.G.'s lawyers in the case, at Sutherland Asbill & Brennan, referred calls to the company. Asked about the lawsuit, Mark Herr, an A.I.G. spokesman, said Thursday that "A.I.G. is taking this action to ensure that it is not required to pay more than its fair share of taxes."

Labels: AIG, tax dodges, tax havens

 

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3/20/2009 01:10:00 PM 1 comments

 

UBS Admits To Massive Tax Evasion Scheme

by Dollars and Sense

From the wires:

Banking giant UBS has agreed to pay $780 million and turn over once-secret Swiss banking records to settle allegations it conspired to defraud the U.S. government of taxes owed by big clients.

As part of the deal struck in federal court in Fort Lauderdale, Fla., UBS has made the unprecedented step of agreeing to immediately turn over to the U.S. government account information for U.S. customers of the bank's cross-border business.

In doing so, federal authorities have struck a big crack in Switzerland's vaunted bank secrecy laws.

UBS will pay $780 million in fines, penalties, interest and restitution for conspiring to create sham accounts to hide the assets of U.S. clients from the U.S. government.

"We accept full responsibility for these improper activities," Peter Kurer, chairman of Swiss-based UBS AG, said in a statement. He added that the bank was determined to abide by the terms of the deal with U.S. criminal and securities officials.

"Client confidentiality, to which UBS remains committed, was never designed to protect fraudulent acts or the identity of those clients, who, with the active assistance of bank personnel, misused the confidentiality protections," he said Wednesday.

According to U.S. officials, when an acquisition in 2000 of a U.S. company brought UBS a host of new, American clients, the bank set about to evade new reporting requirements for those clients. To do so, UBS executives helped U.S. taxpayers open new accounts in the names of sham entities.

Prosecutors contend that UBS executives used encrypted software and other counter-surveillance techniques to prevent anyone from detecting that they were actively marketing such Swiss bank secrecy — and tax evasion — to American taxpayers.

The clients, in turn, filed false tax returns that omitted the income they earned in their Swiss accounts, according to the court papers.

Read the rest of the story here.

Labels: Corporate Fraud, Corporate Swindles, Corruption, tax dodges, UBS

 

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2/18/2009 06:50:00 PM 0 comments

 

Meanwhile, UK Corporations Dodge Tax

by Dollars and Sense

A series from the Guardian, with an ever-stimulating (though I think he borders on the delusional when he talks about MoveOn.com) column from George Monbiot. Particularly interesting is the use of the designation "intellectual property," that obnoxious term celebrated by all manner of conventional economists, as a cover for slush funds. You can bet similar dodges are employed by US firms, too.

Here's a link to the series.

And to Monbiot's column.

Labels: bailout, corporate taxes, financia crisis, George Monbiot, tax dodges, Tax law, United Kingdom

 

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2/02/2009 08:28:00 PM 0 comments

 

Tax Havens For Bailout Recipients

by Dollars and Sense

A new Government Accountability Office (GAO) report shows that many of the largest companies receiving bailout billions have set up hundreds of off-shore tax shelters to avoid paying taxes. Major scofflaws include Citigroup, Morgan Stanley, AIG, and Bank of America.

From the Washington Post:

A majority of America's largest publicly traded companies and the U.S. government's largest federal contractors -- including some receiving millions in federal bailout money -- use multiple subsidiaries in offshore tax havens to conduct business and avoid paying U.S. taxes, a new report finds.

The new Government Accountability Office (GAO) report, released today by Sens. Byron L. Dorgan (D-N.D.) and Carl M. Levin (D-Mich.), lists Citigroup and Morgan Stanley as having set up hundreds of tax haven subsidiaries, along with American International Group and Bank of America. Also in the tax-haven list are well-known companies and such federal contractors as American Express, Pepsi and Caterpillar.

GAO, searching publicly available data filed with the Securities and Exchange Commission, determined that 83 of the 100 largest publicly traded corporations and 63 of the 100 largest federal contractors maintain tax havens in 50 subsidiaries. Dorgan and Levin said they requested the updated report from one several years ago because they are focused on combating offshore tax abuses, which they estimated cause $100 billion in lost U.S. tax revenue each year.

"This report shows that some of our country's largest companies and federal contractors, many of which are household names, continue to use offshore tax havens to avoid paying their fair share of taxes to the U.S. And, some of those companies have even received emergency economic funds from the government," Dorgan said. "I think we should take action to shut down these tax dodgers, and we will be introducing legislation to do just that."

To illustrate the problem, Levin said the report found that Citigroup has set up 427 tax haven subsidiaries to conduct its business, including 91 in Luxembourg, 90 in the Cayman Islands and 35 in the British Virgin Islands. He said other havens include Switzerland, Hong Kong, Panama and Mauritius.

The rest of the pitiful story is here.

Labels: Bank of America, Citibank, Morgan Stanley, tax dodges

 

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1/16/2009 02:33:00 PM 0 comments

 

AIG Keeps Sinking

by Dollars and Sense

AIG executives, back from their spa retreat and British hunting trips, are busily back at work throwing tax dollars into the furnace.

In little over a month, the company has accessed $90.3 billion (nearly three-quarters) of the $122.8 billion in credit lines extended by the Fed in exchange for an 80% stake in the company.

AIG chief Edward Liddy said that the company may soon have to ask for more money if the company is forced to post more collateral for bond holdings that it guaranteed but that are now being downgraded.

Under extreme pressure from NY Attorney General Andrew Cuomo, AIG has agreed to put a hold on paying out performance bonuses to former and current executives.

The impact of the AIG collapse is being felt far and wide. Thirty municipal transit agencies, including those in Atlanta, Chicago, DC, San Francisco, and Los Angeles, are facing the prospect of being forced to come up with hundreds of millions of dollars. The crisis is a result of complicated (but legal) tax dodges between the transit agencies and private banks (explained here in the Washington Post). Basically, the banks paid the agencies large sums upfront that would be repaid in installments over time. Exploiting a loophole in the tax code, the banks saved hundreds of millions in taxes, but split the profit with the transit agencies. The deals were guaranteed by AIG, but now that the insurer is on the skids and the federal government has declared an end to the tax dodge, the banks are demanding that cash-strapped transit agencies hand over hundreds of millions in cash in the next few weeks.

The demands may actually be a bargaining tactic to force Congress to extend the tax breaks.

Labels: AIG, corporate taxes, economic meltdown, public transit, tax dodges

 

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10/24/2008 03:01:00 PM 2 comments