Executives at Wells Fargo (NYSE:WFC) had a shareholder lawsuit filed against them in reference to “SILO” tax shelters. It wasn’t clear at the time of this writing who these shareholders were, but they were represented by law firm Cotchett, Pitre & McCarthy, which filed the suit on their behalf.
The lawsuit, which was filed in San Francisco Superior Court, alleges executives and directors of Wells Fargo didn’t stop the SILO practices, which are used for tax write-offs by companies, and are in the middle of being chllenged by the IRS and Congress at this time.
This is why I mentioned not knowing who these shareholders were, as the implication it was concerned citizens, when if fact it could be employees of the government or similar types who have bought shares in the company for the purpose of making it look like regular shareholders are outraged over the situation, when if fact it’s more of a setup to litigate the issue.
Let’s see. All the regular shareholders at Wells Fargo are worried over the company getting tax savings and generating profits for them? I don’t think so.
Either way, at the time of this alleged wrongdoing, it wasn’t illegal to participate in these SILO deals, and so I’m not sure what the point of the lawsuit is other than the IRS using certain shareholders to file the lawsuit so they can confiscate even more taxes from the company for their tax coffers. Now the SILO deals have been ruled to be illegal as tax shelters, even though at the time referred to in the lawsuit they weren’t.
This is also a response to the lawsuit filed by Wells Fargo to get a refund from having to pay huge tax penalties on the transactions. One of the lawsuits filed by Wells Fargo for that purpose was recently tossed by a Federal Claims Court based on they were never legitimate tax shelters from the beginning.
Judge Thomas Wheeler’s reasoning went like this:
“If the Court were to approve of these SILO schemes, the big losers would be the Internal Revenue Service (“IRS”), deprived of millions of taxes rightfully due from a financial giant, and the taxpaying public, forced to bear the burden of the taxes avoided by Wells Fargo… A cadre of company executives, in concert with a team of well known legal and accounting firms and other consultants, regularly constructed and participated in these tax schemes for Wells Fargo, apparently blind to professional standards of care.”
Talk about the ultimate in populist rhetoric. The poor taxpayers are saved from having to bear the brunt of the bad Wells Fargo giant using a legal tax shelter (at the time) to cut back on its taxes. Another “victim” of the alleged crime was the Internal Revenue Service, as you can see from the judge’s statement.
This of course has nothing to do with shareholders of Wells Fargo, but is retribution for Wells Fargo using their rights to sue the government and IRS over what it perceives and wrongful practices of imposing fines on them for what was legal behavior. It doesn’t matter if it was frowned upon or was being checked out at the time, or if someone agreed or disagreed with it. The point is whether it was legal or not, and at the time it was, undermining the logic behind the purpose of the lawsuit in the first place.
This is just the government attempting to strong-arm Wells Fargo because they no there will be no backlash because of the current economic situation which is largely blamed on the banks.
