Barclays PLC (ADR) (BCS) and Deutsche Bank AG (USA) (DB) under Scrutiny over Tax Evasion Claims

Two Global Banks and 13 hedge funds will be the subject of discussions for the coming weeks after a senate subcommittee confirmed it was preparing a report about how these institutions evaded paying taxes worth billions of dollars. Under scrutiny, according to Eamon Javers from CNBC, are Barclays PLC (ADR) (NYSE:BCS) and Deutsche Bank AG (USA) (NYSE:DB).

Deutsche Bank AG (USA) (NYSE:DB) and Barclays PLC (ADR) (NYSE:BCS) have already reiterated that they complied with the law and that they did not engage in any unlawful practices in their operations.

“Under scrutiny here are a number of prominent names including Deutsche Bank AG (USA) (NYSE:DB), which has said it has fully complied with all the applicable laws. Barclays PLC (ADR) (NYSE:BCS) also says it’s fully compiled with the law” said Eamon Javers.

The senate investigation subcommittee claims that the banks and hedge funds used basket options that created a ‘fiction’ showing that the banks owned account assets that were, on the other hand, operated by the hedge funds. This way, they were able to avoid paying billions of dollars in taxes. The hedge funds are reported to have controlled the accounts.

The subcommittee claims that the hedge funds traded in the accounts with a view of avoiding long-term capital gain or guaranteeing long-term capital gain tax rates as well as avoiding leverage limits.

“The hedge funds controlled those assets, the committee says, and traded in accounts all of it was done to avoid long-term capital gains or to guarantee long-term capital gains tax rates for some of those profits and the funds also avoided leverage limits,” said Mr. Javers.

Some of the hedge funds under scrutiny include George Weiss Associates and Renaissance Technologies, managed by Jim Simons which have also reiterated that they fully cooperated with the law in all their operations.  The U.S senate subcommittee, according to CNBC’s Melisa Lee is just trying to say that the financial institutions under question only did things they did not like, and did not break the law.

Disclosure: none