Last week, according to a Department of Justice (DOJ) Press Release, Deutsche Bank Aktiengesellschaft (DB), “agreed to pay more than $130 million to resolve the government’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) and a separate investigation into a commodities fraud scheme. “The resolution includes criminal penalties of $85,186,206, criminal disgorgement of $681,480, victim compensation payments of $1,223,738 and $43,329,622 to be paid to the US Securities & Exchange Commission in a coordinated resolution.” Settlement documents include a Deferred Prosecution Agreement(DPA) and Information. This settlement comes on the heels of another Foreign Corrupt Practices Act (FCPA) settlement in August 2019, where the Bank paid $16.2 million to settle a ‘Princeling’ charge that it corruptly hired sons and daughters of foreign officials and of employees of state-owned enterprises. Today, I continue my multi-part exploration of this settlement.

The bribery schemes were as basic in imagination as there were in brute force. According to the Information, “Deutsche Bank contracted with third-party intermediaries, which it called “Business Development Consultants” or “BDCs,” to obtain and retain business globally. The BDCs were approved by then-high-level Deutsche Bank management and various regional committees.” In some instances,  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 BDC’s create false justifications for payments.

Indeed, the Saudi BDC was a special purpose vehicle, “beneficially owned by the wife of an individual who was responsible for managing the family office and the personal investments (“the Family Office”) of a Saudi official (“the Family Office Manager”).” Moreover, the Saudi BDC was acting as a proxy for a foreign official and payments to a BDC that were actually bribes paid to a decisionmaker for the Bank in order to obtain lucrative business for the bank. The Saudi BDC would be paid fees that were falsely recorded in the Company’s books as “referral fees,” when the true purpose was for  Deutsche Bank to make corrupt payments to the Family Office Manager in order for  Deutsche Bank to retain the business of the Family Office.

The Family Office Manager made investment decisions for the Family Office and, during the relevant FCPA period, the Bank managed hundreds of millions of dollars in investments for the Family Office. The Bank contracted with the Saudi “BDC to facilitate and conceal corrupt payments from the Bank to the Family Office Manager, because Deutsche Bank bankers believed that the Family Office Manager would take the Saudi official’s business to another bank if it did not pay bribes to the Family Office Manager.”

All of this was well-known within the Bank. The Information reported that “at least four Managing Directors of DEUTSCHE BANK AG and several high-level employees and officers of DEUTSCHE BANK AG and Deutsche Bank’s European subsidiary, knew that the Saudi BDC was the wife of the Family Office Manager and that the purpose of engaging the Saudi BDC was to corruptly provide bribe payments to the Family Office Manager in order to retain the business of the Family Office.” Additionally, this knowledge went much higher than simply the Managing Director level. Finally, the Information stated, “On or about May 3, 2011, a Deutsche Bank Director, who was also the regional head of sales and business management (“Deutsche Bank Director 1”), emailed Managing Directors of the defendant DEUTSCHE BANK AG, including a high-level executive of Deutsche Bank’s European subsidiary, seeking support and approval for the arrangement because “[the Saudi BDC’s] husband [was] a Director of the [] client,” creating an economic connection between the client and the “paid [Saudi BDC].””

This demonstrates not only actual knowledge but criminal intent as well. The Bank even helped to create the shell company to facilitate the corrupt payment, assisting the Saudi BDC in establishing a shell company in the British Virgin Islands (“the BVI Company”) and opened an account for the BVI Company at the Bank.

While it may not seem possible, the scheme involving the Abu Dhabi BDC was even more brazen. The Information stated, “Prior to entering into a contractual relationship with the Abu Dhabi BDC, certain bankers of the defendant DEUTSCHE BANK AG, including at least four Managing Directors of DEUTSCHE BANK AG who also held high-level regional and functional positions in Deutsche Bank, knew that: (1) the Abu Dhabi BDC was a relative of a high-ranking official of, and a decision-maker for, the Abu Dhabi SOE and its parent entity (“the Abu Dhabi SOE Official”); (2) the Abu Dhabi BDC was acting as a proxy for the Abu Dhabi SOE Official; and (3) paying BDC fees to the Abu Dhabi BDC was a requirement for Deutsche Bank to obtain the Project X business from the Abu Dhabi SOE.”

Several emails quoted in the Information pounded this message home.

Email 1 – (“Deutsche Bank AG Managing Director 1”), emailed a regional Deutsche Bank executive, who was also a Managing Director of DEUTSCHE BANK AG, explaining that “[the Abu Dhabi BDC] confirms he is behind [the Abu Dhabi SOE Official].”

Email 2 – Managing Director of the defendant DEUTSCHE BANK AG sent an email to Deutsche Bank AG Managing Director 1 stating that the Abu Dhabi BDC “really is the gate keeper to [the Abu Dhabi SOE Official].”

Email 3 – Deutsche Bank AG Managing Director 1 also made it clear to others at Deutsche Bank that approving the Abu Dhabi BDC’s contract was necessary to close the deal for Project X.

Email 4 – Deutsche Bank AG Managing Director 1 emailed another Managing Director of the defendant DEUTSCHE BANK AG, who was the head of a regional business line, stating, “We need to close the [Abu Dhabi BDC] angle within the next 48hrs. Need ur [sic] leadership and influence on getting it thru GMRAC.”

Lest you think these were simply rogue employees going somewhere the Bank was not aware of, the formal bank compliance committee in charge of BDCs specifically approved the Abu Dhabi BDC in spite of (1) knowledge of “the Abu Dhabi BDC’s relationship to government officials; (2) the Abu Dhabi BDC’s lack of qualifications to serve as a BDC; (3) the indirect involvement of another intermediary (the “Abu Dhabi Intermediary”) who was a relative of the Abu Dhabi BDC and business partner of the Abu Dhabi SOE Official, and who had roles with several state-owned entities, including the parent company of the Abu Dhabi SOE; and (4) the fact that the Abu Dhabi SOE Official was also pressuring Deutsche Bank to finance a yacht in which the Abu Dhabi SOE Official had an ownership interest in exchange for winning additional business from the Abu Dhabi SOE.”

As I said yesterday, a Bank so corrupt it was worthy of Donald Trump.

Tomorrow we consider the red flags overlooked and internal control failures.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2021

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