Deutsche Bank Aktiengesellschaft (Deutsche Bank or the Company) has agreed to pay more than $ 130 million to resolve the government investigation into violations of the Foreign Corrupt Practices Act (FCPA) and a separate investigation into a commodity fraud scheme .
The resolution includes criminal penalties of $ 85,186,206, criminal restitution of $ 681,480, victim compensation payments of $ 1,223,738 and $ 43,329,622 to be paid to the United States Securities and Exchange Commission in a coordinated resolution.
Deutsche Bank is a multinational financial services company based in Frankfurt, Germany. Charges arise from a scheme to hide corrupt payments and bribes made to third-party intermediaries, falsely recording them in Deutsche Bank books and records, as well as related internal accounting control violations and a separate scheme to engage in fraudulent and manipulative goods commercial practices involving publicly traded precious metal futures contracts.
Deutsche Bank has entered into a three-year deferred prosecution agreement (DPA) with the Criminal Division’s Fraud and Money Laundering and Asset Recovery Section (MLARS) and the New York East District Attorney’s Office. Criminal information was presented today in the Eastern District of New York accusing Deutsche Bank of a conspiracy charge for violating the FCPA books and records and internal accounting control provisions and a conspiracy charge of committing electronic fraud affecting a financial institution in regarding the conduct of commodities.
“Deutsche Bank engaged in a seven-year course of conduct, during which it failed to implement a system of internal accounting controls related to the use of company funds and falsified its books and records to hide corrupt and improper payments,” said the Deputy Deputy Attorney General Robert Zink of the Criminal Division of the Department of Justice. “Separately, Deutsche Bank traders on three continents have sought to manipulate our public financial markets through fraud for five years. This resolution exemplifies the department’s commitment to help ensure that publicly traded companies plan and implement appropriate and appropriate systems of internal accounting controls and maintain accurate and truthful corporate documentation. It is also an example of the department’s efforts to police the United States’ public markets so that everyone can continue to trust and rely on the integrity of our public financial systems. “
“Deutsche Bank was involved in a criminal scheme to hide payments from so-called consultants around the world that served as bribery channels to foreign employees and others so that they could unfairly obtain and retain profitable business projects,” said the acting attorney. Seth D. DuCharme, from the East District of New York. “This office will continue to maintain accountable financial institutions that operate in the United States and engage in practices to facilitate criminal activity in order to increase its financial results.”
“The US Postal Inspection Service is proud to investigate complex cases of fraud and corruption that affect American investors,” said Inspector in charge Delany De Léon-Colón of the Criminal Investigations Group of the US Postal Inspection Service. “This kind of misleading activity can cause immeasurable economic losses to competitive markets around the world. The combined efforts of our partners in the FBI and the Department of Justice helped to take meaningful actions today, which illustrate our efforts to protect the United States and the international market. “
The FCPA Case
According to admissions and court documents, between 2009 and 2016, Deutsche Bank, acting through its employees and agents, including high-level regional directors and executives, consciously and intentionally conspired to maintain false books, records and accounts to hide, among other things, payments to a business development consultant (BDC) who acted as a proxy for a foreign civil servant and payments to a BDC that were actually bribes paid to a decision maker by a client to obtain profitable business for the bank. In some cases, Deutsche Bank made payments to BDCs that were not supported by invoices or evidence of any services provided. In other cases, Deutsche Bank employees created or helped the BDC create false justifications for payments.
Regarding a Saudi BDC, Deutsche Bank admitted that its employees conspired to sign a contract with a company owned by the client of a client’s decision maker to facilitate the payment of a bribe of more than $ 1 million to the decision maker . Deutsche Bank approved the relationship with the BDC despite Deutsche Bank employees knowing about the relationship between the Saudi BDC and the decision maker, and approved the corrupt payments despite Deutsche Bank employees openly discussing the need to pay the Saudi BDC for encourage her husband to continue doing business with Deutsche Bank. When requesting approval of a payment, Deutsche Bank employees warned that the “customer and [the Saudi BDC] are closely linked and. . . any cessation of payment to the [the Saudi BDC] will certainly cause a significant flow of [business]”Of the customer.
Deutsche Bank also hired an Abu Dhabi BDC to obtain a profitable transaction, although Deutsche Bank employees know that the Abu Dhabi BDC had no qualifications as a BDC, in addition to its family relationship with the client’s decision maker, and that the Abu Dhabi BDC was in fact acting as a proxy for the customer’s decision maker. Deutsche Bank paid Abu Dhabi BDC more than $ 3 million without invoices.
By agreeing to misrepresent the purpose of payments to BDCs and falsely characterizing payments to third parties as payments to BDCs, Deutsche Bank employees conspired to falsify Deutsche Bank books, records and accounts in violation of the FCPA. In addition, Deutsche Bank employees consciously and intentionally conspired to fail to implement internal accounting controls in violation of the FCPA, among other things, by failing to conduct significant due diligence in relation to BDCs, making payments to certain BDCs that were not under contract with Deutsche Bank on time and make payments to certain BDCs without invoices or proper documentation for the services allegedly performed.
Deutsche Bank will pay a total criminal fine of $ 79,561,206 under the FCPA scheme. In an issue related to the US Securities & Exchange Commission, Deutsche Bank will also pay $ 43,329,622 in restitution and pre-trial interest.
The case of commodity fraud
According to admissions and court documents, between 2008 and 2013, Deutsche Bank’s precious metals dealers became involved in a scheme to defraud other dealers on the New York Mercantile Exchange Inc. and Commodity Exchange Inc., which are commodity exchanges operated by CME Group Inc. On several occasions, traders at Deutsche Bank’s precious metals desk in New York, Singapore and London placed orders to buy and sell precious metals futures contracts with the intention of canceling those orders before execution, including on attempt to profit by deceiving other market participants by injecting false and misleading information about the existence of genuine supply and demand for precious metals futures contracts.
On September 25, 2020, a Chicago federal jury found two former Deutsche Bank precious metals traders, James Vorley, 42, from the United Kingdom, and Cedric Chanu, 40, from France and the United Arab Emirates, guilty of electronic fraud. that affected a financial institution for its respective functions in the commodities scheme. A third former Deutsche Bank trader, David Liew, 35, of Singapore, pleaded guilty on June 1, 2017, to conspiracy to commit electronic fraud affecting a financial institution and counterfeiting. A fourth former Deutsche Bank broker, Edward Bases, 58, of New Canaan, Connecticut, was charged with a third replacement charge on November 12, 2020 and is awaiting trial for fraud and conspiracy. An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond reasonable doubt in court.
Deutsche Bank has agreed to pay a total criminal amount of $ 7,530,218 in relation to the commodities scheme. This figure includes criminal damages of $ 681,480, victim compensation payments of $ 1,223,738 and a criminal fine of $ 5,625,000, which will be fully credited against Deutsche Bank’s payment of a $ 30 million civil monetary fine to the Commission of U.S. Commodity Futures Trading in January 2018 in connection with substantially the same commodity pipeline.
The department reached this resolution with Deutsche Bank based on a number of factors, including the Company’s failure to voluntarily disclose conduct to the department and the nature and seriousness of the offense, which included corrupt payments, intentional violations of the FCPA accounting provisions , and violations of commodity trade in three countries. Deutsche Bank received full credit for its cooperation with the department’s investigations and for its significant redress. The penalties associated with the FCPA and electronic fraud conspiracies reflect a 25 percent discount on the fine range of the United States Sentencing Guidelines, otherwise applicable, to explain Deutsche Bank’s 2015 resolution on handling the Fee London Interbank.
The FCPA investigation is being conducted by the US Postal Inspection Service and is being processed by the Criminal Division’s Fraud and Money Laundering and Asset Recovery Section, and by the New York City East District Attorney. Trial Attorneys Katherine Nielsen, Elizabeth S. Boison and Nikhila Raj, and Assistant US Attorneys Alixandra Smith and Whitman Knapp. The Department of Justice’s International Affairs Office provided assistance in this case.
The commodities case is being investigated by the FBI Field Office in New York and is being processed by the Fraud Section. Deputy Chief Brian R. Young, Deputy Chief Avi Perry and Prosecutor Leslie S. Garthwaite of the Fraud Section are suing the case.
The Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information on the Department of Justice’s FCPA enforcement efforts can be found at www.justice.gov/criminal-fraud/foreign-corrupt-practices-act.
The MLARS Banking Integrity Unit investigates and prosecutes banks and other financial institutions, including their directors, managers and employees, whose actions threaten the integrity of the individual institution or the broader financial system.
Individuals who believe they may be a victim in the case of commodities should visit the Fraim Section’s Victim Witness website for more information.