Lehman and Morgan in tax trouble?

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Several investment banks are accused of devices which have been created to allow investors and hedge funds to avoid taxes. These taxes are in the millions of dollars.

In a report that was made for the US Senate Committe these allegations imply that several banks worked with hedge funds to create schemes which would allow investors not to pay dividend tax. This is a tax which is applied to offshore investors.

Lehman Brothers and Morgan Stanley are two of which have been accused of constructing investment vehicles that have allowed them to skirt the law, and to allow clients to pay less in taxes.

Carl Levin, Senator who chairs the Senate Committee, claims that he wants the IRS (Internal Revenue Service) to take action agains the banks and their hedge fund clients for the unpaid taxes. Carl Levin also says that the IRS has turned a blind eye to this for far to long.


According to the report Morgan Stanley created a dividend enhancement product which generated around twenty five million dollars in 2004 for the firm, and has cost over three million dollars to the US goverment in taxes which have not been paid in the last seven years. This also includes the year of 2007.

From an internal document from Lehman Brothers it says that just in the year 2004 the bank helped the clients avoid paying one hundred and fifteen million dollars in taxes.Mr. Levin wishes to force legislation in the Senate to make it much more difficult for structures to be created allowing taxes to be avoided.
The IRS is apparently will be aggressively pursuing those transactions which they believe to be abusive.

A spokes person for Morgan Stanley claims that trading issues fully complied with the laws and will continue to comply to all regulations and tax laws. Now the spokes person for Lehman Brothers did not make a comment.