Shelter-Related Fraud Plea for Ex-Banker

Domenick Degiorgio reportedly helped create sham transactions, including loans that supposedly stretched for seven years but actually were short-te...
Stephen TaubAugust 11, 2005

A former New York banker has pleaded guilty to charges stemming from the promotion of tax shelters, causing the federal government to lose hundreds of millions in tax revenues, according to the Associated Press.

Domenick Degiorgio, who worked out of the Manhattan office of German bank Bayerische Hypo und Vereinsbank, pleaded guilty to conspiracy, a scheme to defraud his employer, and tax evasion, according to the report. He pulled off the scheme while he worked as co-head of the bank’s financial engineering group from 1996 through 2003, the AP added.

Citing court papers and a government source close to the case, the wire service reported that a partner at KPMG LLP — which helped process the shelters for the German bank — allegedly sent an e-mail to a New York attorney, who also was promoting the shelters, saying he and the attorney had received a “get out of jail free card.” The KMPG partner allegedly claimed that they had obtained permission from others at the accounting firm for the bank to proceed with a tax shelter known as BLIPS (bond linked issue premium structure).

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According to the AP, Degiorgio — with the approval of senior bank management — committed the bank to participate in more than $3.3 billion worth of tax shelter transactions. Degiorgio admitted he helped prepare false documents to support sham transactions so clients could shelter income, reported the wire service, including loans that supposedly stretched for seven years but actually were short-term transactions. “The money never left the bank,” he reportedly admitted.

As a result of the scheme, the wire service added, U.S. taxpayers wrote off more than $1.3 billion of phony tax losses from transactions that were supported by fraudulent documents.

Degiorgio’s plea comes the same day that The New York Times reported that KPMG is likely to agree to pay as much as $500 million in fines as part of a deal with the government to avoid criminal charges for its role in marketing questionable tax shelters. “The discussions have all been directed at a negotiated resolution, not an indictment,” said the paper’s source, who described the negotiations as “a constructive process,” and added that “they’re well along.”