In August 2019, Deutsche Bank paid $16.2 million “to settle changes that it violated the FCPA by hiring relatives of foreign government officials [in both the Asia Pacific Region and Russia] in order to improperly influence them in connection with investment banking business).” (See here and here for prior posts).
Late Friday, Deutsche Bank (a German investment bank and financial services company with shares traded on the NYSE between 2009 and 2016) joined the ever expanding list of FCPA repeat offenders as the DOJ and SEC announced (here and here) an approximate $122.6 million Foreign Corrupt Practices Act enforcement action focused on the company’s relationship with third parties in Abu Dhabi, Saudi Arabia, Italy, and China.
The approximate 16 month gap between Deutsche Bank’s FCPA enforcement actions is the shortest among the large group of FCPA repeat offenders.
The FCPA component of the enforcement action included: (i) a DOJ criminal penalty of approximately $79.6 million; and (ii) an approximate $43 million resolution with the SEC. (The DOJ enforcement action also included allegations that “Deutsche Bank precious metals traders engaged in a scheme to defraud other traders on the New York Mercantile Exchange Inc. and Commodity Exchange Inc. for which the company agreed to pay a total criminal amount of $7.5 million).
According to this criminal information, between 2009 and 2016, “Deutsche Bank contracted with third-party intermediaries, which it called “Business Development Consultants” or “BDCs” to obtain and retain business globally. The BDC’s were approved by then-high-level Deutsche Bank management and various regional committees.” In summary fashion, the information alleges:
“Beginning in or about at least 2009 through in or about at least 2016, the Deutsche Bank, acting through its employees and agents, knowingly and willfully conspired and agreed with others to maintain false books, records, and accounts that did not accurately and fairly reflect the transactions and dispositions of Deutsche Bank assets, by, among other things: (1) falsely concealing bribes paid to a client’s decisionmaker in Saudi Arabia to retain that client’s business by recording the payments as “referral fees” paid to a BDC; and (2) falsely concealing millions of dollars of payments made to an intermediary acting as a proxy for a foreign official in Abu Dhabi by recording the payments as “consultancy” payments to a BDC.
During the Relevant FCPA Period, the defendant Deutsche Bank, acting through its employees and agents, knowingly and willfully failed to implement and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the execution of transactions in accordance with management’s authorization, and which would have helped detect and stop Deutsche Bank from continuing to make corrupt payments to and through BDCs.
Deutsche Bank, acting through its employees and agents, knowingly and willfully conspired and agreed with others to fail to implement and maintain sufficient internal accounting controls related to payments to BDCs, including by, among other things, failing to conduct meaningful due diligence regarding BDCs, making payments to certain BDCs who were not under contract with Deutsche Bank at the time, and making payments to certain BDCs without invoices or adequate documentation of the services purportedly performed. Certain Deutsche Bank employees and agents also created, and helped BDCs to create, false justifications and documentation necessary for payment approval.
During the Relevant FCPA Period and as a result of the above-described FCPA scheme, Deutsche Bank made approximately $35,360,536 in profits from the transactions related to three specific BDCs.”
Under the heading “Deutsche Bank’s Failure to Implement Adequate Controls in Response to Red Flags Related to BDCs,” the information alleges:
“In or about 2009, a group within Deutsche Bank’s internal audit function conducted a targeted review of “business arrangements that could be associated with corruption” in Deutsche Bank’s Corporate Finance operations in the Asia-Pacific region. In 2009, the internal audit group issued a report identifying “risk indicators” and highlighting concerns with Deutsche Bank’s use of, and payments to, BDCs, including lack of oversight to ensure BDCs were not used for corrupt purposes and lack of documentation supporting the actual services rendered. The report made numerous recommendations regarding the use and payment of BDCs and recommended that Deutsche Bank’’s global BDC policy be updated accordingly. The report was distributed to high-level management at Deutsche Bank, including members of Deutsche Bank’s Management Board. However, Deutsche Bank failed to implement additional controls sufficient to address the issues identified in the report.
In or about 2011, the internal audit group conducted another internal review of BDC relationships at Deutsche Bank as part of Deutsche Bank’s global anti-corruption program and identified numerous ongoing control failures regarding BDCs. It found, among other things: deficiencies in the due diligence conducted by Deutsche Bank employees on BDCs; failure by Deutsche Bank to appropriately document, mitigate, and manage anti-corruption risks associated with multiple BDCs; and failure by Deutsche Bank to document the proportionality of, and justifications for, payments to BDCs. The internal audit group’s 2011 report, which was also distributed to high-level management at Deutsche Bank including members of Deutsche Bank’s Management Board, made additional recommendations for internal controls improvements in the BDC program. Nevertheless, Deutsche Bank continued to approve engagements of, and payments to, BDCs without implementing additional controls.”
Regarding Deutsche Bank’s relationship with a BDC in Abu Dhabi to obtain business with an investment vehicle indirectly owned by the Abu Dhabi government (Project X), the information alleges:
“Prior to entering into a contractual relationship with the Abu Dhabi BDC, certain bankers of Deutsche Bank, including at least four Managing Directors of Deutsche Bank 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.
The Abu Dhabi BDC’s engagement was considered and approved by the Global Markets Risk Assessment Committee (“GMRAC”), which included high-ranking Deutsche Bank employees from multiple subsidiaries and divisions of Deutsche Bank, including a high-ranking employee in Deutsche Bank’s regional Legal and Compliance function. Documentation reflecting the GMRAC process shows that committee members approved the BDC relationship despite indicia of corruption related to the engagement of the Abu Dhabi BDC, including: (1) 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 (the “Yacht”) in exchange for winning additional business from the Abu Dhabi SOE.
Deutsche Bank ultimately provided financing for the Yacht.
Deutsche Bank executed the BDC contract with the Abu Dhabi BDC on or about June 3, 2010. Seven days after Deutsche Bank signed the BDC contract with the Abu Dhabi BDC, Deutsche Bank received the business from the Abu Dhabi SOE for Project X.
Deutsche Bank did not conduct due diligence on the Abu Dhabi BDC before executing the contract with the Abu Dhabi BDC and beginning to pay fees thereunder. Deutsche Bank even failed to document the Abu Dhabi BDC’s full name and biographical information. In total, Deutsche Bank corruptly paid the Abu Dhabi BDC approximately $3,464,650 without any invoices and with minimal evidence of services provided, and caused those payments to be falsely recorded in Deutsche Bank’s books, records, and accounts.”
Under the heading “Falsification of Records and Failures to Implement Controls in Connection with Corrupt Payments in Saudi Arabia,” the information alleges:
“In or about 2011, Deutsche Bank entered into a BDC contract with a special purpose vehicle (“SPV”) 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”). The business was managed out of a European Deutsche Bank subsidiary. Under the terms of the contract, the SPV owned by the Family Office Manager’s wife (“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, Deutsche Bank managed hundreds of millions of dollars in investments for the Family Office. Deutsche Bank contracted with the Saudi BDC to facilitate and conceal corrupt payments from Deutsche 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.
Prior to entering into a contractual relationship with the Saudi BDC, certain bankers of Deutsche Bank, including at least four Managing Directors of Deutsche Bank and several high-level employees and officers of Deutsche Bank 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.
To conceal the corrupt nature of the agreement with the Saudi BDC, Deutsche Bank Director 1 falsely portrayed the Saudi BDC as the source of the business with the Family Office in documentation provided to Deutsche Bank. Deutsche Bank Director 1 and other Deutsche Bank employees knew that the Saudi BDC was not the source of the business, because a Deutsche Bank Managing Director and regional business manager (“Deutsche Bank AG Managing Director 2”) had a preexisting relationship with the Family Office from his previous employment at another bank, and he brought the Family Office client with him to Deutsche Bank in or about 2010, months before he insisted that the Saudi BDC was the “finder” and source of the business. Deutsche Bank bankers were aware that the Family Office Manager and the Saudi BDC had received “finder’s fees” from this other bank, and that they would expect the same from Deutsche Bank.
Because the Saudi BDC arrangement involved Deutsche Bank, Deutsche Bank’s European subsidiary, and the establishment of a new client account at Deutsche Bank for the BVI Company, multiple senior officers of Deutsche Bank considered and approved the Saudi BDC’s consulting engagement. This approval chain for the Saudi BDC included a senior executive of Deutsche Bank’s European subsidiary and a regional wealth management executive. Each of these individuals approved the Saudi BDC relationship despite understanding the corrupt purpose of the engagement. The Deutsche Bank European subsidiary senior executive cited “the high value of the client” as justification for paying the Saudi BDC.”
According to the information, “between in or about 2011 and 2012, Deutsche Bank corruptly paid the Saudi BDC a total of approximately $1,087,538 and caused those payments to be falsely recorded in the Company’s books, records and accounts.” The information alleges that were cleared through New York.
Under the heading “Further Falsification of Records and Failures to Implement Controls,” the information alleges:
“Between in or about February 2007 and February 2016, Deutsche Bank maintained a BDC relationship with a regional tax judge (“the Italian BDC”) to bring clients to Deutsche Bank.
Email communications and other documents exchanged between Deutsche Bank employees around the time of the Italian BDC’s onboarding indicated clearly that the Italian BDC was a tax judge.
Furthermore, invoices and records of payments to the Italian BDC throughout his engagement were known by certain Managing Directors and employees of Deutsche Bank to be false, including because certain employees assisted in the falsification of documents, and Deutsche Bank made payments to the Italian BDC outside of the terms of his BDC contracts.
Deutsche Bank paid the Italian BDC a total of approximately $864,450 between in or about 2007 and 2016.”
Based on the above allegations, the information charges a conspiracy to violate the FCPA’s books and records and internal controls provisions.
The criminal charge was resolved through this three year deferred prosecution agreement. The DPA was based on the following relevant considerations:
a. the Company engaged in two separate and factually unrelated multiyear criminal schemes, namely, the FCPA scheme charged in Count One of the Information, which was investigated by the Offices, and the commodities trading scheme charged in Count Two of the Information, which was separately investigated by the Fraud Section. For reasons of efficiency and convenience, the Offices and the Company have agreed to resolve both investigations at the same time in this case;
The FCPA Case
b. the Company did not receive voluntary disclosure credit pursuant to the FCPA Corporate Enforcement Policy in the Department of Justice Manual 9-47.120, or pursuant to the Sentencing Guidelines, because it did not voluntarily and timely self-disclose to the Offices the FCPA conduct described in the Statement of Facts;
c. the Company received full credit for its cooperation with the FCPA investigation conducted by the Offices, including making detailed factual presentations, providing regular updates on the Company’s internal investigation, highlighting key facts and documents, making foreign-based employees available for interviews in the United States, and producing extensive documentation to the Offices, including documents located in foreign jurisdictions;
d. the Company provided to the Offices all relevant facts known to it, including information about the individuals involved in the conduct described in the Statement of Facts and conduct disclosed to the Offices prior to the Agreement;
e. the Company engaged in remedial measures, including: conducting a robust root cause analysis and taking substantial steps to remediate and address the misconduct, including significantly enhancing its internal accounting controls, its anti-bribery and anti-corruption program, and its Business Development Consultants (“BDCs”) program on a global basis; making a significant reduction in the number of BDCs used by the Company; imposing a requirement that the Anti-Fraud, Bribery and Corruption function (“AFBC”) approve, and a member of the Management Board support, any new BDC arrangement; undertaking a review of BDCs on an annual basis with involvement by representatives of AFBC; instituting enhanced due diligence procedures and practices related to BDCs; and instituting enhanced anti-bribery training for employees. The Company also undertook employment actions based on the findings, which included disciplining and terminating certain employees;
f. the Company’s 2015 Deferred Prosecution Agreement with the Fraud Section and the Department of Justice’s Antitrust Division for criminal violations in connection with the Company’s manipulation of the London Interbank Offered Rate (“LIBOR Resolution”), including the guilty plea of a Company subsidiary, and the imposition of an independent compliance monitorship in 2015, which is ongoing;
g. although the Company had inadequate anti-corruption controls and an inadequate anti-corruption compliance program during the period of the conduct described in the Statement of Facts, the Company has enhanced and has committed to continuing to enhance its anti-bribery and anti-corruption program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in Attachment C to this Agreement (Corporate Compliance Program);
h. based on the Company’s remediation and the current state of its anticorruption compliance program, the Company’s agreement to report to the Offices as set forth in Attachment D to this Agreement (Corporate Compliance Reporting), and the Company’s independent compliance monitor obligations in connection with the LIBOR Resolution, the Offices determined that an independent compliance monitor was unnecessary;
i. the nature and seriousness of the offense conduct, as described in the Statement of Facts, including making corrupt payments to BDCs, the willful falsification of books and records to conceal those improper payments, and the willful failure to implement an adequate system of internal controls;
j. the Company’s contemporaneous parallel resolution with the U.S. Securities and Exchange Commission (“SEC”) through a cease-and-desist proceeding relating to the corruption conduct described in the attached Statement of Facts, and the Company’s agreement to pay $35,145,619 in disgorgement and prejudgment interest of $8,184,003;
k. the Company has agreed to continue to cooperate with the Offices in any ongoing investigation …”.
With respect to the FCPA conduct, the DPA sets forth an advisory guidelines range of $70.7 million to $141.4 million and states:
“The Company agrees to pay a total criminal monetary penalty in the amount of $79,561,206 (the “Total Criminal Monetary Penalty”). This reflects a twenty-five percent discount off the middle of the applicable Sentencing Guidelines fine range. The Total Criminal Monetary Penalty will be paid to the United States Treasury within ten business days of the execution of this Agreement, of which $20,000,000 will be paid to the United States Postal Inspection Service Consumer Fraud Fund. The Company and the Offices agree that this penalty is appropriate given the facts and circumstances of this case, including the Relevant Considerations …”.
As a condition of settlement, Deutsche Bank agreed to, among other things, report to the DOJ annually during the term of the DPA regarding remediation and implementation of the compliance measures required by the DPA.
In the DOJ release, Acting Deputy Assistant Attorney General Robert Zink stated in pertinent part:
“Deutsche Bank engaged in a seven-year course of conduct, during which it failed to implement a system of internal accounting controls regarding the use of company funds and falsified its books and records to conceal corrupt and improper payments. […] This resolution exemplifies the department’s commitment to help ensure that publicly traded companies devise and implement appropriate and proper systems of internal accounting controls and maintain accurate and truthful corporate documentation. It also stands as an example of the department’s efforts to police the public U.S. markets so that all may continue to trust, and rely upon, the integrity of our public financial systems.”
Acting U.S. Attorney Seth D. DuCharme of the Eastern District of New York stated:
“Deutsche Bank engaged in a criminal scheme to conceal payments to so-called consultants worldwide who served as conduits for bribes to foreign officials and others so that they could unfairly obtain and retain lucrative business projects. This office will continue to hold responsible financial institutions that operate in the United States and engage in practices to facilitate criminal activity in order to increase their bottom line.”
Delany De Léon-Colón (Inspector in Charge of the U.S. Postal Inspection Service’s Criminal Investigations Group) stated:
“The U.S. Postal Inspection Service takes pride in investigating complex fraud and corruption cases that impact American investors. This type of deceptive activity can cause immeasurable economic losses to competitive markets around the world. The combined efforts of our partners at the FBI and Department of Justice helped to bring today’s significant action which illustrates our efforts to protect the United States and the international marketplace.”
The SEC enforcement action was based on the same core FCPA conduct alleged in the DOJ matter plus additional findings relevant to a Chinese consultant. In summary fashion, this administrative order finds:
“This matter concerns the improper use, from at least 2009 through 2016, by Deutsche Bank of third-party intermediaries, business development consultants, and finders (collectively “BDCs”) to obtain and retain global business. Hundreds of BDCs were used during this timeframe, and their use was approved by past members of Deutsche Bank’s senior management and various regional committees.
Among those engaged were foreign officials, their relatives and associates in circumstances where bribery risks were neither assessed nor sufficient steps taken to mitigate bribery risks posed by such engagements.
Deutsche Bank lacked sufficient internal accounting controls related to the use and payment of BDCs during this time period, resulting in payments to BDCs that were actually bribe payments as well as payments made for unknown, undocumented or unauthorized services. The payments in those circumstances were inaccurately recorded as legitimate business expenses in Deutsche Bank’s books and records, and involved invoices and documentation falsified by its employees. During this period, certain now-former members of senior management, including members of the Management Board, were aware that these internal accounting controls were insufficient to provide reasonable assurance that transactions with BDCs were executed in accordance with management authorization and to provide reasonable assurance that payments were accurately recorded in Deutsche Bank’s books and records. Deutsche Bank failed to take sufficient steps to address and remediate these known internal accounting control failures until 2016.
As a result of this conduct, Deutsche Bank violated the internal accounting control and books and records provisions of the FCPA. During this period approximately $7 million in payments to BDC’s were improperly booked as legitimate expenses, and Deutsche Bank was unjustly enriched by approximately $35 million.”
Regarding Deutsche Bank’s existing control environment, the order states:
“Throughout the relevant time period, Deutsche Bank’s Global Anti-Corruption Policy (“Anti-Corruption Policy”) prohibited the payment of bribes, both directly and indirectly, to obtain an improper personal or business advantage in both the public and private sectors. Deutsche Bank prohibited the offer of anything of value which may be deemed to influence any act or decision of a public official and also prohibited the use of BDCs to improperly obtain confidential information about business opportunities. Under Deutsche Bank’s relevant policies, third-party representatives could only be engaged in circumstances where: 1) there was documented pre-contractual due diligence; 2) a written contract which set out the representative’s role and/or services was provided in a form approved by the Bank’s Legal department (“Legal”); 3) the contract contained a documented description of services to be performed, amount to be paid, and other material terms of the engagement; 4) the payment was proportionate to the value of the services rendered; and 5) appropriate review and approval was obtained before the engagement began. Additionally, Deutsche Bank prohibited any undocumented payments or bribes.
Since at least 2008, Deutsche Bank’s Use of Business Development Consultants Policy (“BDC Policy”), its global policy governing the use of consultants and finders, required that the Bank conduct thorough due diligence prior to retaining and paying a BDC to determine, among other things, whether the BDC, or their immediate family members and close associates, had any political or governmental affiliations or exposures. A BDC with a “political or governmental affiliation” was classified as a politically exposed person (“PEP”) and required enhanced due diligence; this person could not be engaged without additional vetting and approval by senior management, Legal, and the Bank’s compliance function (“Compliance”) to provide reasonable assurance that potential conflicts of interest were identified and addressed. The BDC Policy also required that prospective BDCs have “sufficient expertise and qualifications” to perform the contemplated services. Payments were required to be proportionate to the services rendered and made only in circumstances where the supporting invoice contained “sufficient detail regarding the services or matters to which such invoice relates.”
While the BDC Policy required that regional and divisional management approve and oversee the use of BDCs, in practice, the implementation and oversight of the Policy fell to the BDC’s “business sponsor.” Business sponsors were responsible for generating business for Deutsche Bank and were compensated, in part, based on the revenue earned by Deutsche Bank. The business sponsors recommended the engagement of the identified BDC, determined whether payments to the BDCs complied with both the terms of the BDC contract and the Bank’s policies, and maintained records concerning the services provided by the BDC, including invoices.”
Under the heading “Deutsche Bank Identified Internal Accounting Control Failures In 2009 But Failed To Remediate Until 2016,” the order finds:
“In approximately 2008, as part of the Bank’s anti-corruption program, a group within Deutsche Bank’s internal audit function conducted a review of business arrangements in its AsiaPacific region in order to assess the integrity and legitimacy of certain transactions. In 2009, the internal audit group issued a report (“2009 Report”) in which it identified certain concerns with the Bank’s use of one BDC including insufficient oversight over that BDC engagement to ensure it was not being used for corrupt purposes and a lack of documentation detailing what actual services were rendered by the BDC. The 2009 Report recommended that Deutsche Bank’s global BDC Policy be revised and that the internal accounting controls around BDCs be enhanced to include centralized and thoroughly documented due diligence to demonstrate that a BDC was qualified to perform the services for which it was contracted, maintenance of detailed records of all work performed by the BDC, and a requirement that BDC engagements include books and recordkeeping provisions giving Deutsche Bank inspection rights. The 2009 Report was provided to senior management at Deutsche Bank, including members of the Management Board; however, only limited steps were taken in response.
In 2011, the same group conducted another internal investigation into the Bank’s BDC relationships and identified numerous internal accounting control failures. Those failures were identified in a report (“2011 Report”) and included: problems related to specific BDC engagements; lack of due diligence; general lack of training and awareness of Deutsche Bank’s BDC Policy and due diligence requirements among employees; failure by business sponsors to appropriately assess, document, and mitigate corruption risks and conflicts of interests; and failure to document the proportionality and justification for certain BDC payments. The 2011 Report was also distributed to senior management at Deutsche Bank, including members of the Management Board, and again only limited steps were taken in response.
Contrary to its internal policies and with known failures in its relevant internal accounting controls, between 2009 and 2016, Deutsche Bank engaged some BDCs: 1) with no demonstrated expertise or qualifications; 2) who simultaneously worked for a government entity from which Deutsche Bank sought business; 3) without a written agreement; 4) using form agreements with no substantive description of the services to be performed and/or provisions calling for “success fee” payments; 5) at rates that were unreasonably high as compared to the work allegedly being performed; and 6) in circumstances where either adequate due diligence was not performed or where due diligence was conducted more than a year after the BDC was retained and paid.
As a result of its lack of sufficient internal accounting controls relating to BDCs, Deutsche Bank paid certain BDCs in circumstances where no invoices were submitted and where invoices contained insufficient documentation to detail what services were performed. In certain instances, when invoices were submitted, they were vague and inadequate, making it nearly impossible to determine what, if any, services were performed or to determine the purpose for the payment. In some instances, BDCs were paid in excess of what was provided for pursuant to their contract with Deutsche Bank and some BDCs were paid even though they had no contract at the time certain of the services were purportedly performed. Amongst the BDC payments made in these circumstances were those that were bribes.”
The SEC order concerns the same allegations as the DOJ enforcement action regarding Abu Dhabi, Saudi Arabia and Italy plus additional findings regarding a Chinese consultant.
Regarding the Chinese consultant, the order finds:
“Deutsche Bank retained Consultant A to help the Bank establish a clean energy investment fund with a Chinese government entity. Prior to entering into a BDC relationship, Consultant A introduced himself and provided certain Deutsche Bank employees with a curriculum vitae indicating that he “is currently the senior advisor to [the regional Chinese] . . . Government” with which the Bank sought to establish the investment fund. Deutsche Bank employees working to establish the investment fund knew that in addition to potentially being a government official or otherwise acting in an official capacity, Consultant A was also “a close friend of” a foreign government official whose approval was needed for the establishment of the investment fund. Notably, that same government official required that Deutsche Bank work through Consultant A to establish the investment fund.
Despite these facts, Consultant A was retained as a BDC without due diligence review being conducted as required.
Between April 2011 and May 2013, Consultant A was paid at least $1.6 million. This included payments for services purportedly performed before he was engaged. Consultant A submitted invoices for gifts and entertainment provided to foreign government officials that were reimbursed without adequate review or advance approval by Compliance, as required under Deutsche Bank’s policies. Moreover, Deutsche Bank did not fully document the services Consultant A purportedly performed and paid him without appropriate documentation. For example, although Deutsche Bank paid him for purported reimbursements of “out-of-pocket expenses” or “client-related expenses,” Consultant A provided little verifiable support for the purported expenses. In addition to these payments, Consultant A was given a partnership interest in the investment fund that required little or no upfront capital and entitled him to a large potential profit share. One Deutsche Bank employee explained contemporaneously, “[Consultant A] has acted as an advisor and facilitator to this initiative and it is a requirement of [the government entity] that he is included as both an equity (very small) participant and also part of the investment committee.” This agreement was executed without Legal and Compliance having full information about the circumstances of Consultant A’s relationship with the government entity.
In early 2017, Deutsche Bank began the dissolution of the investment fund because it failed to raise capital; the Bank earned no profits from this arrangement.”
Based on the above, the order finds that Deutsche Bank violated the FCPA’s books and records and internal controls provisions.
Under the heading “Commission Consideration of Deutsche Bank’s Cooperation and Remedial Efforts,” the order states:
“Deutsche Bank’s cooperation included: responding promptly to the Commission’s requests for information and documents; identifying issues and facts that would likely be of interest to the Commission’s staff; providing regular updates of factual findings developed during the course of its own internal investigation; making employees and now-former employees located outside the United States available for interviews; and identifying key documents and providing factual chronologies to the Commission’s staff.
Deutsche Bank’s remedial measures included: enhancements to its internal accounting controls; enhancements to its Anti-Bribery & Corruption Framework and policies concerning BDCs on a global basis; the significant reduction of the number of BDCs used by the Bank; the institution of enhanced procedures and practices to monitor and control BDC engagements; increasing the Bank’s anti-corruption compliance staff; and increased and regular anti-bribery training specifically addressing the use of third parties to obtain and retain business. Deutsche Bank also undertook employment actions based upon its findings regarding the underlying conduct, including separating certain employees.”
According to the order, the SEC did not impose a civil penalty based upon the $79.6 million “criminal penalty for the same misconduct” as part of Deutsche Bank’s resolution with the DOJ.
Charles Cain (Chief of the SEC’s FCPA Unit) stated:
“While third parties can assist in legitimate business development activities, it is critical that companies have sufficient internal accounting controls in place to prevent payments to third parties in furtherance of improper purposes.”
Gibson Dunn attorneys Richard Grime and Lora MacDonald represented Deutsche Bank.
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