Not long ago when the supposed end of the world was upon us and assets were blowing up all over the place, Deutsche Bank saw a way out…lie.
Deutsche bank had a portfolio of derivatives that were dropping like a brick that would have, if they played by the rules, resulted in the bank’s insolvency. So they lied about their value to the tune of up to $3.3 billion. This is a criminal act that was exposed in 2012 by a couple of whistleblowers.
In 2015 the SEC fined Deutsche Bank $55 million for this criminal act. Once again as the sun rises in the east and sets in the west, nobody went to jail. Two former employees, Matthew Simpson and Eric Ben-Artzi, uncovered the lie. They reported to the Securities and Exchange Commission that if Deutsche Bank had followed the law and reported properly the value of their positions their capital would have fallen to levels that would have rendered the bank insolvent and in need of a government bailout to stay afloat.
Under new whistleblower rules the duo responsible for turning Deutsche Bank in, were entitled to a pretty nice reward, 15% each splitting $16.5 million. However, one of the whistleblowers rather than take the money and sip Pina Coladas in the Caribbean, turned the windfall down in protest. Eric Ben-Artzi told the SEC he is declining his share of the money, which just so happened to be the third largest in the whistleblower programs history. Mr. Ben-Artzi stated that the fine should be paid by individual executives, not shareholders, and suggested the revolving door of senior personnel between the SEC and the bank had played a role in executives going unpunished.
We have been talking about the lack of any justice on Wall Street going back to the dot com era. Executives at the major firms are never held responsible for their actions. The firms pay the fine, and the executives responsible walk away. We have also reported on the incestuous relationship between the big banks and the SEC over the years. Mr. Ben-Arzi wrote in an opinion piece in the Financial Times, “In this case, top SEC lawyers had held senior posts at the bank moving in and out of top positions at the SEC even as the investigations into malfeasance at Deutsche Bank were ongoing.”
Having the bank pay the fine is absolutely absurd. The bank is nothing more than a tax-identification number and a logo. Corporations don’t steal money. People steal money. The victims, the ones who end up paying are the shareholders of the company. Ben-Artzi stated, “Meanwhile top executives retired with multimillion-dollar bonuses based on the misrepresentation of the bank’s balance sheet. It is therefore especially disappointing that in 2015, after a lengthy investigation helped by multiple whistleblowers, the SEC imposed a fine on Deutsche’s shareholders instead of the managers responsible.”
Once it was discovered that Eric Ben-Artzi was a whistleblower, he was fired and his career on Wall Street was ruined. Unfortunately for Ben-Artzi and the rest of us, crime on Wall Street does pay.
“Although I need the money now more than ever, I will not join the looting of the very people I was hired to protect. I never intended to turn a job in risk management into a crusade, but after suffering at the hands of Deutsche executives I will not join them simply because I cannot beat them. I request that my share of the award be given to Deutsche and its stakeholders, and the award money clawed back from the bonuses paid to the Deutsche executives, especially the former top SEC attorneys. I would then be happy to collect any award for which I am eligible.”