Merck has been sued by the IRS for $2.3 Billion for back taxes and penalties. It set up a company in Bermuda which owns its patents and then its pays that company royalties.

It took advantage of what is often called “tax arbitrage.” The usual strategy: lower a company’s tax bills by structuring transactions so certain types of income or expenses are classified as one thing by the IRS, but something very different by another country’s tax regulators.

Apparently Al Capone wasn’t kidding when he said “A good lawyer with a briefcase can steal more than ten men with machine guns.”