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
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.
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