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Deutsche Bank Raises Liability Reserves, Revising '05 Results
By David Reilly and Edward Taylor
The Wall Street Journal
Friday, March 10, 2006

Deutsche Bank AG revised its 2005 results to account for financial penalties it could face for its role in financing improper tax shelters sold by KPMG LLP.

The bank said it had increased a contingent liability related to its activities on behalf of KPMG, essentially a reserve to take account of potential payments that may have to be made at a future date.  The net effect on earnings will be to lower 2005 profit by 250 million ($298 million), to 3.53 billion.

Deutsche Bank didn't disclose the size of the contingent liability.  Nor does such a provision mean the bank will have to pay any amount to cover such a liability.  The amounts of such reserves are rarely disclosed because they could give away a company's position in legal negotiations.  Deutsche Bank's adjustment related to preliminary figures for 2005 that it had released in early February;  the bank is scheduled to report final results later this month.  Prosecutors have scrutinized Deutsche Bank's involvement with the tax shelters.

In a statement announcing the adjustment, Deutsche Bank said it had revised upward the contingent liability in the wake of a deferred prosecution agreement and fine agreed to in February by fellow German bank HVB Group.  As part of that settlement, HVB, owned by Italy's UniCredit SpA, agreed to pay $29.6 million in fines, restitution and penalties for its role arranging financing for transactions related to shelters sold by KPMG.

Write to David Reilly at david.reilly@wsj.com and Edward Taylor at edward.taylor@wsj.com


http://online.wsj.com/article/SB114195740865294407.html?mod=us_business_whats_news