Rabobank Denies US Tax Shelter Claims

by Ulrika Lomas, Tax-News.com, Brussels

05 May 2008

Dutch Bank Rabobank has strenuously denied claims by a former employee in a recent Wall Street Journal article that it was a 'leading enabler' of illegal corporate tax shelters for clients in the United States.

In a statement refuting the WSJ report, published on 2nd May, Rabobank said that the former employee's allegations were "wholly untrue and without foundation" and many of the statements in the article mischaracterised the bank's role in the transactions described therein. Rabobank's role in the transactions was only as a financier, and never as a structurer or promoter, the bank argued.

According to the WSJ, while the bank's involvement in US corporate tax-planning has gone on largely unnoticed, its role in helping major corporations reduce their tax bills has been "extensive." These schemes, involving billions of dollars in financing for transactions, generated tax benefits for corporations including, among others, General Electric and Merck & Co, it alleged.

However, Rabobank insisted in its response to the report that it is committed to a code of conduct "that provides that the bank will always act in accordance with the highest standards of integrity, and will not engage in any activities that are designed to mislead governmental agencies, tax authorities or third parties."

"All transactions referenced in the article were subject to the bank's internal approval processes, as well as review by expert external advisors to the parties," the bank stated.

The WSJ report was based on a draft of Rabobank's 2005 internal audit report which was given to the publication by a former employee.

The bank said that this action not only breached its own confidentiality rules, but also made confidential client information available to the public.

Nonetheless, Rabobank claimed that its own assessment in its internal audit report evaluated its structured finance operations against the bank’s own "very conservative business model and policies," and did not conclude there was any unethical or illegal conduct on the part of the bank or its employees.

The US Department of Justice has been conducting a broad investigation of certain tax shelter practices for a number of years, and has sought information from Rabobank and numerous other industry participants related to certain transactions.

"Rabobank has at all times been cooperating fully with the Department of Justice," the statement concluded.

Recommended