The United States has accused Ernst & Young of failing to comply with an Internal Revenue Service request for documents in a probe over the tax liability of Georg Schaeffler, chairman of German supplier of the same name. The office of Manhattan U.S. Attorney Preet Bharara said in a lawsuit that the IRS had requested for testimony and "books, records and other data" related to a tax investigation of the Schaeffler chairman.
The US probe is connected to personal tax liabilities of Georg Schaeffler dating back to 2004, according to a declaration by Paul Doerr, the IRS agent investigating the matter. The German supplier is jointly owned by Georg Schaeffler and his mother, Maria-Elisabeth Schaeffler. The supplier is struggling to cut debt from an attempt organized by former chief executive Juergen Geissinger to acquire a limited stake in Continental AG that backfired. Georg Schaeffler owns 80 percent of Schaeffler, which is considered as the world's second-largest maker of automotive, aerospace and industrial roller bearings.
"I am conducting an investigation into the income tax liabilities of Georg F.W. Schaeffler (the taxpayer) for tax years 2004, 2005, 2009 and 2010," Doerr said in the declaration filed in a Manhattan federal court case brought by Schaeffler in 2013 against the IRS. Doerr said he had investigated Schaeffler's tax liabilities for 2007 and 2008 to determine his correct federal tax liability for the period."
The agency had investigated "the valuation of assets related to the restructuring and refinancing transactions that occurred in 2009 and 2010, after the acquisition of Continental," Doerr remarked. Schaeffler filed the lawsuit seeking to stop the government's subpoenas and document requests of Ernst & Young and Dentons, a law firm he tapped related to the IRS probe. Schaeffler claimed that the IRS has sought privileged documents that it isn't entitled to.
Schaeffler recently named Klaus Deller as its new chief executive effective July 1, 2014, to replace Klaus Rosenfeld who has been working as interim CEO while serving as the supplier chief financial officer since October 2013. Deller, who is currently the head of commercial-vehicle braking systems at Knorr-Bremse, will lead a new chapter at the German supplier since founding family ousted Geissinger as its CEO.
The German supplier is still under pressure to slash debt from an attempt lead by Geissinger to pucrahse a limited stake in Continental. Schaeffler currently holds a 46-percent stake in Continental, from a peak of 90 percent. At the end of September 2013, Schaeffler was able to cut its net debt to EUR5.7 billion from more than EUR10 billion. [source: automotive news - sub. required]