By Dow Jones Business News, February 27, 2013, 05:52:00 PM EDT
By Debbie Cai
A federal court rejected two tax-shelter transactions entered into by Dow Chemical Co. ( DOW ), that allegedly created
about $1 billion in phony tax deductions, and imposed penalties on the chemical producer.
Chief Judge Brian A. Jackson on the District Court for the Middle District of Louisiana stated that Goldman Sachs
Group Inc. ( GS ) and law firm King & Spalding created the schemes to form a partnership that Dow operated out of its
European headquarters in Switzerland. The judge in his opinion said the U.S. Justice Department was right to reject the
artificial tax benefits created by these schemes that were designed to exploit perceived weaknesses in the tax code and
not designed for legitimate business reasons.
Details on the penalties weren't disclosed.
Dow Chemical said that it had paid all taxes with interest with respect to tax years 1993 to 2003 that were involved
in this case, but sought a determination by the U.S. District Court that the taxes at issue were wrongly assessed by the
Internal Revenue Service.
"Dow is disappointed by the trial court's decision in this case, and we believe the opinion is not supported by the
facts and applicable law," the company said in a statement. "Dow is exploring all of its options, including appeal."
A spokesman for King & Spalding said he wasn't aware of the case and as policy the firm doesn't comment on client
matters. Goldman Sachs declined to comment.
Dow Chemical last October unveiled plans to shut 20 facilities and eliminate 2,400 jobs in Europe, the U.S. and Japan
in a bid to counter the impact of slowing global demand. Last month, the chemical company reported that it swung to a
fourth-quarter loss as it was weighed down by charges tied to its restructuring effort, though core earnings improved.
Shares closed at $31.81 and were flat after hours. The stock is up 8.1% over the past six months.
Write to Debbie Cai at debbie.cai@dowjones.com
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(END) Dow Jones Newswires
02-27-131752ET
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