Senate subpoenas four Wall Street firms: report
NEW YORK (Reuters) - Four Wall Street firms have received subpoenas from Senate investigators who are examining whether the firms improperly structured transactions to help hedge funds avoid dividend taxes, The Wall Street Journal reported on its Web site on Monday.
Citigroup Inc (C.N), Lehman Brothers Holdings Inc LEH.N, Morgan Stanley (MS.N) and UBS AG (UBSN.VX) have received subpoenas relating to the use of derivatives by offshore investors, including some big hedge funds, to help avoid withholding taxes on U.S. stock dividends, the Journal reported, citing people familiar with the matter.
A Citigroup official and a Morgan Stanley spokeswoman declined to comment when contacted by Reuters. Officials at the other firms were not immediately available for comment.
Investigators have also contacted a number of hedge funds to ask about the use of the derivatives, the Journal reported.
The investigators are examining the transactions to determine whether the securities firms and banks acted improperly by failing to withhold taxes on U.S. stock dividends, the Journal said, citing sources.
The probe was launched by the Senate Permanent Subcommittee on Investigations, the paper said. Federal tax authorities also are seeking information about these types of transactions, it said.
A spokeswoman for subcommittee Chairman and Michigan Democrat Carl Levin declined to comment.
At stake is more than $1 billion in withholding taxes on U.S. stock dividends that are sidestepped by such trades, the Journal reported.
Investigators are seeking emails, marketing materials and any other documents dating back to January 1, 2000, that are related to these transactions, the Journal cited sources as saying.
It added that they are focusing on swaps executed for 21 days or less involving underlying securities where there was a scheduled dividend payment during that time, the Journal said.
The investigators also are asking for information about clients who executed trades through them, the Journal said, referring to hedge funds that engaged with Lehman. The paper said they are Angelo, Gordon & Co, JP Morgan Chase & Co's Highbridge Capital Management, JMG Triton and KBC Alternative Investment Management.
Attempts by Reuters to reach the funds were unsuccessful.
(Reporting by Robert Macmillan, editing by Jacqueline Wong)
(Additional reporting by Anupreeta Das in San Francisco and Kevin Drawbaugh in Washington, DC)
