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August 17, 2005

All Business: Corporate fraud gives firms a big tax break

  • Enron, WorldCom and other corporations can write off payments to settle shareholder lawsuits as "ordinary and necessary" expenses.
    • By RACHEL BECK
    AP Business Writer

    NEW YORK — New estimates put the federal budget deficit at $331 billion this year, and one reason it's so big is that companies will be claiming billions of dollars in tax breaks for settling shareholder lawsuits accusing them of corporate malfeasance.

    For some companies, federal and state tax deductions will amount to as much as 40 cents on every dollar they pay to settle investors' claims. And given all the major settlements announced this year from the likes of Time Warner Inc., Citigroup Inc., JPMorgan Chase & Co. and many others, that quickly adds up.


     
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