ABUSE OF STRUCTURED FINANCIAL PRODUCTS- Misusing Basket Options to Avoid Taxes and Leverage Limits MAJORITY AND MINORITY STAFF REPORT

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option accounts. 254 In other words, under the tax indemnification agreement, Barclays would not
have to pay any tax penalties levied on it in connection with the COLT options.
The overall effect of this arrangement was that RenTec received all of the gains resulting
from its trading orders, while Barclays remained economically neutral to the designated
accounts. Barclays instead made money from its financing, trading, and structuring fees. 255
The following chart provides a simplified diagram demonstrating how the COLT basket
options structure was intended to work.
Figure 1: A simplified diagram outlining the COLT transaction
(2) Deutsche Bank MAPS
In contrast to Barclays which used a single option structure over time, over the years,
Deutsche Bank developed two different types of basket option structures under the MAPS name.
The first was used from 1998 through the end of 2007. The second was used from 2008 to 2010,
but the bank ceased offering it after the IRS issued its basket options GLAM in November 2010.
In 2012, Deutsche Bank began offering the revised MAPS structure again, but limited the
duration of the option to less than one year.
254 Id at 880.
255 Subcommittee interview of Lansford Dyer, Barclays (4/3/2014); 7/15/2014 letter from Barclays outside counsel
to the Subcommittee, PSI-Barclays-22-000001-014, at 007.