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About POGO's Federal Contractor Misconduct Database (FCMD)

The government awards contracts to companies with histories of misconduct such as contract fraud and environmental, ethics, and labor violations. In the absence of a centralized federal database listing instances of misconduct, the Project On Government Oversight (POGO) is providing such data. We believe that it will lead to improved contracting decisions and public access to information about how the government spends hundreds of billions of taxpayer money each year on goods and services. Report an instance of misconduct »

General Electric

Castle Harbour Tax Shelter

Date: 01/24/2012 (Date of Second Appellate Court Decision)

Misconduct Type: Tax

Enforcement Agency: Treasury – IRS

Contracting Party: None

Court Type: N/A

Amount: $62,200,000

Disposition: Restitution

Synopsis: The U.S. Internal Revenue Service alleged that TIFD III-E, Inc., a subsidiary of General Electric Capital Corporation, entered into a tax avoidance scheme through which it substantially underreported its income taxes in the 1990s. In 1993, TIFD formed a partnership named Castle Harbour LLC with two Dutch banks, under which it held a fleet of leased commercial aircraft. Under the provisions of the partnership agreement, TIFD received most of the actual leasing income, but 98 percent of the taxable income was allocated to the banks, which were not subject to U.S. income taxes. In 2001, the IRS determined that TIFD owed $62.2 million in taxes. TIFD paid the amount and sued in federal court for a refund. In January 2012, the appellate court, for the second time, ruled in favor of the government and upheld the assessment.