$100 MILLION IN PENALTIES IMPOSED IN "STARS" TAX SHELTER FRAUD CASE

FROM:  U.S. JUSTICE DEPARTMENT 
Friday, September 20, 2013
Justice Department Prevails in “Stars” Tax Shelter Case, Court Imposes Over $100 Million in Penalties

BB&T Corporation Engaged in an Abusive Tax Shelter Designed by Barclays Bank and KPMG to Generate Nearly Half a Billion Dollars in Foreign Tax Credits.
On Friday, the Court of Federal Claims in Washington, D.C., ruled that a subsidiary of the BB&T Corporation was not entitled to $660 million in tax benefits that BB&T claimed based on its participation in an abusive tax shelter known as Structured Trust Advantaged Repackaged Securities (STARS).  Judge Thomas C. Wheeler, who delivered the opinion of the Court, imposed $112 million in penalties.

Barclays Bank PLC and KPMG LLP jointly developed and marketed the STARS transaction to subvert the foreign tax credit rules and generate illicit tax benefits to be shared among the transaction’s participants.  BB&T additionally employed Sidley & Austin LLP to provide  tax advice supporting the transaction.  After hearing evidence during a month-long trial in March, Judge Wheeler ruled for the United States “on all grounds,” determining that BB&T, Barclays, KPMG and Sidley Austin’s conduct with regard to STARS was “nothing short of reprehensible,” and that the considerable effort put into the transaction was a “waste of human potential.”

“It is an affront to all taxpayers who work hard and do the right thing when our largest corporations rely on abusive schemes to avoid paying their fair share of taxes,” said Assistant Attorney General Kathryn Keneally of the Justice Department's Tax Division, hailing the Court of Federal Claims’ opinion.  “Today’s ruling sends a strong message that no matter how sophisticated the scheme, these sham tax shelters will not stand.”

Assistant Attorney General Keneally thanked the agents and attorneys at the Internal Revenue Service who assisted the Justice Department, as well as Tax Division Senior Litigation Counsel Dennis Donohue, Trial Attorneys John Schoenecker, Kari Larson, Raagnee Beri, William Farrior, and Special Attorney Allen Kline.