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A federal judge has declined to dismiss a civil suit brought by a husband and wife who claim that Sidley Austin Brown & Wood and Deutsche Bank Securities Inc., offered a tax shelter the firms knew would be challenged by the IRS.

A federal judge has declined to dismiss a civil suit brought by a husband and wife who claim that Sidley Austin Brown & Wood and Deutsche Bank Securities Inc., offered a tax shelter the firms knew would be challenged by the Internal Revenue Service.

Southern District Judge Shira Scheindlin said William and Sharon Seippel’s complaint sufficiently alleged fraud and that the couple’s allegations against the defendants could stand because they went further than alleging aiding and abetting liability.

Judge Scheindlin’s ruling came on motions to dismiss the second amended complaint in Seippel v. Sidley Austin Brown & Wood, 03 Civ. 6942. The first complaint, which alleged claims including racketeering and excessive fees, was dismissed last year by the judge.

The tax shelters at issue involved digital options or swaps in foreign currency, known as COBRA. Alleged misrepresentations about the legality of the shelters were made by Charles Paul of Ernst & Young, but the Seippels charged that Paul was acting on behalf of Deutsche Bank and others, including Brown & Wood, the previous incarnation of Sidley Austin.

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