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Group wants $15M from Deutsche Bank, brokers for damages stemming from tax shelter scheme

By Jonathan Bilyk | Mar 5, 2015

A group of wealthy businesspeople– including some who made their fortunes developing assisted living complexes and building large companies dealing in mobile lighting supply, farming, lumber or recycling waste oil-- have sued Deutsche Bank and two executives with its Chicago branch for more than $15 million.

On Feb. 23, a group of 16 plaintiffs living across the U.S. filed suit in Cook County Circuit Court, accusing the bank and its executives, in collaboration with lawyers at a now-defunct Chicago tax law firm, of deceiving them into entering into “exotic” illegal tax avoidance schemes more than a decade ago.

The suit names Deutsche Bank as a defendant, along with David Parse and Craig Brubaker, both of whom are identified as brokers and executives associated with the bank's Chicago office.

Represented by Chicago attorney Scott F. Hessell of Sperling & Slater P.C., the plaintiffs are Irvin Plowden, Gregory Stringer, Henry Respess, Willard Hill, Dennis Owens, Hammond Hunt, William H. Hunt, Charles Byrd, Maxine Kelley, J. Douglas Reinhart, Daniel DeSimoni, Michael J. DeSimoni, Massimo DeSimoni, and William Bunker.

The suit comes years after Deutsche Bank entered into an agreement with the federal government, paying $550 million in fines to settle an IRS investigation into the bank’s involvement, along with the now-defunct firm of Jenkens & Gilchrist, from 1996 to 2003 in so-called “Son of BOSS” tax shelters.

The shelters worked by creating a new asset to, under a complex process, essentially absorb the tax liability due on a large capital gain from, among other things, the sale of a business or a stake in a business.

The bank and law firm apparently collected many millions of dollars in fees from the plaintiffs and others using the tax shelters.

The IRS began cracking down on the process in the early 2000s, ultimately resulting in the non-prosecution agreement with Deutsche Bank and convictions of lawyers affiliated with Jenkens & Gilchrist’s Chicago office.

However, the plaintiffs in this case allege Parse and Brubaker, under the auspices of Deutsche Bank, concealed from them their involvement in any “Son of BOSS” activity, telling them IRS directives forbidding such tax shelter schemes did not apply to their investments that were purportedly disguised as foreign currency options exchanges.

They said the bank also took steps to conceal the use of the tax shelters when its tax department instructed those reviewing the Son of BOSS transactions “not to create an audit trail in respect to the bank’s tax affairs” and to “white-wash” other internal documents to “keep them protected from disclosure by attorney-client privilege.”

The plaintiffs contend the defendants “concealed their illegal acts and these acts only recently became known to the plaintiffs through the investigative and enforcement efforts of (the federal government).”

All told, the plaintiffs assert that the resulting IRS actions against them have resulted in “at least $15 million” in damages, including back taxes, penalties, interest and fees, to resolve the matter.

Their suit includes five counts against the bank, Parse and Brubaker, alleging fraud, conspiracy, breach of contract, negligent misrepresentation and aiding and abetting Jenkens & Gilchrist.

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