IRS Mulls Bank of NY Mellon Litigation

The New York bank also said in a Securities and Exchange Commission filing that the SEC has completed three separate investigations into the company.

Bank of New York said the IRS is considering litigation over a structured transaction the company entered into that involved payment of British corporate income taxes that were credited against its U.S. corporate income tax liability.

The IRS is reviewing such transactions entered into by Bank of New York in 2001 and 2002. The company said "it is likely that some or all of the credits will be challenged upon completion of the review."

Bank of New York said it doesn't know if the IRS will ultimately designate the transaction for litigation, but the company said it "is prepared to defend its position."

"Any tax benefits associated with these transactions were consistent with the applicable statutory, judicial and administrative authority," the company said.

Bank of New York also said that it discovered "certain inconsistencies" in the tax documentation used to prepare withholding tax returns for 2006 in connection with its acquisition of the JP Morgan Chase corporate trust business. The company said it and JP Morgan Chase voluntarily disclosed this matter to the IRS on Wednesday and that they believe they will be given additional time to resolve the matter.

Separately, Bank of New York said the SEC staff has completed three separate investigations and recommended no resulting enforcement action against the company. One investigation focused on the appropriateness of expenditures made in connection with marketing and distribution of the Hamilton Funds; a second investigation revolved around possible market-timing transactions cleared by Pershing LLC; the third probe looked into Mellon Investor Services LLC's disclosure practices related to the receipt of fees from a search firm that performs in-depth searches for "lost" shareholders.

Bank of New York shares fell $1.16, or 2.5 percent, to $44.84 in late trading Friday.