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Financial Services/Private Equity
Berlin, Germany
Nationality of Foreign Officials: China
Summary of Allegations:
23 August 2019 - From 2006 to 2014, Deutsche Bank’s Asian-Pacific (“APAC”) operations routinely extended employment opportunities to the relatives of various foreign government officials at the officials’ request, in an effort to improperly influence the officials to assist the bank in obtaining business advantages. Such “referral hiring” practices bypassed Deutsche Bank’s formal hiring process, enabling less qualified candidates with conflicts of interest to obtain positions with the bank and to work at times without documentation, oversight, or compliance authorization. Deutsche Bank was unjustly enriched by approximately US$10.8 million as a result of the improper hiring practices in APAC and Russia that occurred within the statute of limitations period.
Between 2011 and 2013, the company was seeking to establish a clean energy investment fund with a Chinese government entity. Upon the request of a Chinese government official with decision-making influence over the fund establishment, the company hired a consultant who concurrently served as a senior advisor to this official. The company proceeded with the recruitment without conducting due diligence, obtaining approval by the compliance department, or documenting the services. The company paid the consultant US$1.6 million and gave the consultant partnership interests in the fund without requiring much upfront capital.
The company eventually dissolved the investment fund in 2017 due to the failure of raising capital.
Approximate Alleged Payments to Foreign Officials: Employment opportunities to family members; US$1.6 million payment to the official's proxy.
Business Advantage Allegedly Obtained: Business deals and advantages. Deutsche Bank was unjustly enriched by approximately US$10.8 million as a result of the improper hiring practices in APAC and Russia that occurred within the statute of limitations period.
Nationality of Foreign Officials: Italy
Summary of Allegations:
Between 2007 and 2015, the company hired a local consultant who also served as a regional tax judge without conducting reasonable due diligence. The company paid the consultant for alleged client introduction services with an unreasonably high commission rate. The consultant did not fulfill the required services but continued to receive payments more frequently than prescribed in the contract and beyond the required period.
The company unjustly profited US$1 million from the engagement.
Approximate Alleged Payments to Foreign Officials: Unspecified.
Business Advantage Allegedly Obtained: Secured clients and business
Nationality of Foreign Officials: Russian Federation
Summary of Allegations:
Deutsche Bank is alleged to have breached anti-bribery rules by hiring the children of Russian officials in exchange for business. Apparently, Deutsche Bank has been conducting an internal investigation into its hiring practices, coined "Project Dastan" for the last several years. The investigation was brought to light in a lawsuit filed by former DB executive Nizar Al-Bassam, for USD 4.7 million in bonuses he claims DB is refusing to pay him because of his alleged misconduct in hiring while he was the corporate finance chief for Central and Eastern Europe. Al-Bassam claims that any such allegations have been long abandoned and that DB has no basis to withhold his bonuses.
Two of the DB employees in question are Elena Arkhangelskaya (hired in 2009) and Alexey Storchak (hired in 2010), whose fathers were both deputy finance ministers overseeing Russian sovereign debt sales at the time of their hires. Al-Bassam denies any improper conduct in connection with their hires.
Approximate Alleged Payments to Foreign Officials: Employment offers to family members.
Business Advantage Allegedly Obtained: Award of business
Nationality of Foreign Officials: Saudi Arabia
Summary of Allegations:
Between 2011 and 2012, the company bribed a General Manager of the Family Office of a Royal Family’s senior member to secure relevant banking business. The company knew the General Manager had decision-making authority regarding the Family Office’s investment decisions and retained him as a consultant.
Both parties entered into a business development consultant contract with payments wired to a shell company owned by the consultant’s wife.
The Family Office was the company’s client before the above engagement and the company inaccurately portrayed the recruitment of the consultant as necessary to maintain the relationship with the FO and the shell company’s owner, factually the consultant’s wife, as among the business sources.
The company paid US$1.1 million to the shell company without receiving services from the consultant or his wife and illicitly profited US$3 million from the arrangement. Relevant payments were falsified as legitimate expenses on the company’s books and records.
Approximate Alleged Payments to Foreign Officials: US$1.1 million
Business Advantage Allegedly Obtained: Secured business from a foreign government
Nationality of Foreign Officials: United Arab Emirates
Summary of Allegations:
Between 2010 and 2011, the company retained a local consultant without pertinent qualifications to broker a deal with an Abu Dhabi sovereign wealth fund, knowing the consultant was a relative and a proxy of a local official with decision-making authority over the fund. The company proceeded with the recruitment with the understanding that the consultant served as a “gatekeeper” to the official who anticipated payments for the alleged consulting services. It entered into an agreement with the consultant without detailing services to be rendered, conducting due diligence, or assessing risks and conflicts of interests.
The company was awarded the deal upon the recruitment, which brought in an illicit profit of US$30 million. It subsequently paid the consultant US$3.5 million without documenting the payments.
Approximate Alleged Payments to Foreign Officials: US$3.5 million payment to foreign official's proxy
Business Advantage Allegedly Obtained: Secured business with a state-controlled fund
Agencies: United States: Commodity Futures Trading Commission , United States: Department of Justice, United States: Securities and Exchange Commission
Results: Cease-and-Desist Order, Criminal Fine, Deferred Prosecution Agreement, Disgorgement
Year Resolved: 2021
Compliance Monitor:
Ongoing: No
Details:
On 8 January 2021, German multinational investment bank Deutsche Bank AG (“Deutsche Bank”) reached a settlement with the U.S. Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission regarding investigations into the FCPA violations and commodities fraud.
In its resolution with the DOJ and the SEC, the company resolves charges of conspiracy and substantive violations of the books and records provisions and internal control provisions of the FCPA. The misconduct occurred between 2009 and 2016 when Deutsche Bank executives used business development consultants as proxies to foreign government officials to channel bribes to these officials and decision-makers to secure business in China, Italy, Saudi Arabia, and the UAE. To disguise the bribery schemes, the executives conspired to neglect internal accounting control implementation and concealed the bribes by mischaracterizing the payments and falsifying books and records.
The three-year deferred prosecution agreement with the DOJ also addressed a scheme in which Deutsche Bank traders placed orders for precious metals futures transactions to profit from manipulation of the relevant supply and demand.
The FCPA section of the resolution requires the company to pay a total of US$122,890,828, comprising a US$79,561,206 criminal penalty to the DOJ and US$43,329,622 in disgorgement and prejudgment interests to the SEC. A 25% discount was applied to the criminal penalty to account for the 2015 resolution of the company’s prior misconduct in manipulating the London Interbank Offered Rate (LIBOR).
Agencies: United States: Department of Justice
Results: Declination
Year Resolved: 2020
Compliance Monitor:
Ongoing: No
Details:
20 March 2020 - Deutsche Bank AG's SEC filing disclosed that the DOJ had closed the investigation of hiring practices without recommending further actions.
Agencies: United States: Securities and Exchange Commission
Results: Administrative Order, Cease-and-Desist Order, Civil Penalty, Disgorgement
Year Resolved: 2019
Compliance Monitor: No
Ongoing: No
Details:
22 August 2019 - the U.S. Securities and Exchange Commission resolved FCPA claims against Deutsche Bank AG (“Deutsche Bank”) stemming from violations of the books and records and internal accounting controls provisions of the FCPA related to the bank's "referral hiring" practices in APAC and Russia.
The SEC issued a consensual cease-and-desist order against Deutsche Bank requiring the company to pay a total of approximately US$ 16.2 million (US$ 10.8 million in disgorgement, US$ 2.4 million in prejudgment interest, and a US$ 3 million civil penalty).
Discovery Method: Voluntary Disclosure
Details:
Unspecified
Country:
Discovery Method: Discovered from separate investigation
Details:
The internal probe on hiring practices in Russian was triggered by the bank's previous similar probes in China
Country: Russian Federation