Mellon Settles With IRS Over Destroyed Tax Returns

by Leroy Baker, Tax-News.com, New York

22 August 2006

Mellon Financial Corporation has announced that its subsidiary, Mellon Bank, N.A., has entered into a settlement agreement with the United States Attorney for the Western District of Pennsylvania relating to the destruction of tens of thousands of tax returns.

According to the settlement agreement, more than 70,000 tax returns were destroyed by Mellon employees in 2001 at the company's "lockbox" processing unit, after they came under pressure from management to meet an Internal Revenue Service processing deadline.

Prosecutors alleged that senior management attempted to cover up the incident to make the IRS to believe that the deadline had been met, and to avoid a breach of the company's contract with the agency.

The destroyed returns and payments had an estimated value of more than $1 billion. However, the company said that there was no fraud, and taxpayers were not harmed.

Under the terms of the agreement, Mellon has agreed to have an independent third party monitor compliance with the terms of the agreement for a three-year period.

No monetary penalties or fines are being imposed under the terms of the agreement, although Mellon will reimburse the federal government for $30,000 of costs incurred by an outside vendor. If Mellon complies with the terms of the agreement, the US Attorney will not prosecute Mellon.

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