German bank UniCredit Bank Aktiengesellschaft may not be liable for lending money to an American investor as part of a tax shelter scheme later shut down by the Internal Revenue Service, even though the bank admitted to wrongdoing in connection with the scheme, a state appeals panel ruled yesterday.

The Appellate Division, First Department, in a decision written by Justice David B. Saxe (See Profile), said that investor John J. Shalam knew or should have known that the tax shelter was illegal. The ruling in Shalam v. KPMG LLP, 112732/05, reversed a decision by Manhattan Supreme Court Justice Bernard J. Fried.

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