whistle blower

DealBook: German Authorities Are Said to Investigate Deutsche Bank

April 4, 2013 by NewsMaker Leave a Comment

Michael Probst/Associated PressThe headquarters of Deutsche Bank in Frankfurt.

PARIS — The German central bank is investigating allegations that Deutsche Bank hid billions of dollars in losses to avoid a potential bailout during the financial crisis, people with direct knowledge of the matter said on Thursday.

The Bundesbank is sending a team to New York next week to look into the allegations, the people said, noting that while the bank was obligated to look into the matter, there was no certainty that the investigation would result in any enforcement measures. The people spoke on condition of anonymity because they were not authorized to speak publicly about the sensitive legal matter.

The investigation stems from allegations that the German lender understated the value of credit derivatives positions beginning in 2007 that were worth as much as $130 billion in so-called notional terms.

The financial positions came under severe stress at the height of the financial crisis, when many complex derivatives could not be traded at all. Had the position been properly reported, according to the allegations, Deutsche Bank would have needed a bailout from the German government. One of the country’s smaller lenders, Commerzbank, received 18.2 billion euros, or $23.3 billion, in taxpayer funds in 2009.

In contrast, Deutsche Bank has avoided the stigma of a bailout during the financial crisis. The German firm is expected to argue that its accounting at the time was in line with industry standards, and that its external auditors signed off on it.

One of Deutsche Bank’s former employees, a quantitative risk analyst named Eric Ben-Artzi, had reported the alleged abuses to the U.S. Securities and Exchange Commission through the regulator’s new whistle-blower program. Mr. Ben-Artzi is also suing the bank, claiming wrongful dismissal, and stands to gain financially if the bank is fined.

News of the Bundesbank’s involvement was reported earlier by The Financial Times. Shares of Deutsche Bank were trading higher in Frankfurt on Thursday.

Ute Bremers, a spokeswoman for the German central bank, said in a statement that the central bank did not comment on individual investigations.

‘‘You may assume that supervisors always investigate allegations that have been raised in order to verify their validity,” she added. “This is the task of banking supervisors.’’

Deutsche Bank declined to comment. Ronald Weichert, a bank spokesman in Frankfurt, referred to a December statement that noted the allegations ‘‘have been the subject of a careful and thorough investigation, and they are wholly unfounded.’’

The people making the allegations, the statement said, had ‘‘no personal knowledge of key facts and information.’’

‘‘We have and will continue to cooperate fully with our regulators on this matter,’’ the Deutsche bank statement said.

Deutsche Bank already faces inquiries and lawsuits related to its conduct before or during the financial crisis. Last month, the bank allocated an additional 600 million euros ($775 million) to cover its legal costs, a move that reduced its pretax profit for 2012 by the same amount.

The additional money was primarily a response to numerous lawsuits stemming from Deutsche Bank’s sales of mortgages and mortgage-related derivatives in the United States.

The bank has also been ensnared by the global investigation into interest rate manipulation. In November, Deutsche Bank said it had set aside money for potential penalties related to rate rigging. In total, Deutsche Bank has set aside 2.4 billion euros ($3.1 billion) to cover legal costs.

Besides raising further questions about ethical standards at Germany’s largest bank, the Bundesbank inquiry could weaken Deutsche Bank’s claim to have weathered the financial crisis better than most peers. While Deutsche Bank did not take a bailout directly from the government, it benefited from measures that the German and U.S. governments as well as central banks have undertaken since 2008 to contain the financial crisis.

Jack Ewing contributed reporting.

Article source: http://dealbook.nytimes.com/2013/04/04/german-authorities-are-said-to-investigate-deutsche-bank/?partner=rss&emc=rss

Media Decoder Blog: The Breakfast Meeting: Hollywood Adapts to Gun Violence, and Senators Criticize ‘Zero Dark Thirty’

December 20, 2012 by NewsMaker Leave a Comment

The Breakfast Meeting

What’s making news in media.

The massacre of first-grade students at Sandy Hook Elementary School in Newtown, Conn., last week has prompted soul searching among Hollywood executives about the kind of fare they are producing, as well as the more practical question of which TV shows and movie screenings should proceed and which should be delayed, Brooks Barnes and Bill Carter write. In a sad reflection of the prevalence of gun-related violence in recent months, these executives have become expert at quickly assessing exactly how bloody — and potentially offensive — their shows and movies are. For example, USA network can perform a keyword search for “shooting,” “school” and “children” to check scripts of programs about to air.

Three prominent United States senators on Wednesday joined critics of the film “Zero Dark Thirty” over its depiction of C.I.A. interrogations in the ultimately successful hunt for Osama bin Laden, Scott Shane writes. In a letter to Michael Lynton, chairman and chief executive of Sony Pictures Entertainment, which is releasing the film, the senators called the film “grossly inaccurate and misleading in its suggestion that torture resulted in information that led to the location” of Bin Laden. The three — Dianne Feinstein, Democrat of California; Carl Levin, Democrat of Michigan; and John McCain, Republican of Arizona — called on Sony to “consider correcting the impression that the C.I.A.’s use of coercive interrogation techniques led to the operation” against Bin Laden, but they do not explain exactly how that could be done.

The documentary “We Steal Secrets,” about Julian Assange and the whistle-blower site Wikileaks, will debut at the Sundance Film Festival in January and represents the beginning of a boomlet in Wikileaks related filmwork, Michael Cieply writes. The documentary is a collaboration between the producer Marc Shmuger, the former chairman of Universal Pictures, and the Oscar-winning director, Alex Gibney.
Also in January, DreamWorks Studios and Participant Media plan to begin shooting a dramatic feature film to be directed by Bill Condon. HBO also has had plans for an Assange movie, and Mark Boal, the writer and a producer of “Zero Dark Thirty,” continues to work on a possible Assange drama based on a New York Times Magazine article, “The Boy Who Kicked the Hornet’s Nest” by Bill Keller.

An investigation of the sexual abuse crisis within the British Broadcasting Corporation concluded on Wednesday that leadership hampered by “rigid management chains” left the organization “completely incapable” of dealing with the crisis, John F. Burns and Stephen Castle write. The report, written by Nick Pollard, a veteran British broadcast executive, criticized the decision to drop a segment that would have exposed decades of sexual abuse by Jimmy Savile, a BBC fixture; but it said that confusion and mismanagement, not a cover-up, lay at the heart of the decision. Also, the report also did not challenge the assertions of Mark Thompson, then head of the BBC and current president and chief executive of The New York Times Company, that he had no role in killing the Savile investigation.

Jenni Rivera, the Mexican-American singer and television star who died in a plane crash in Mexico on Dec. 9, experienced a surge in sales, both in CDs and digital downloads, Ben Sisario writes. Taylor Swift remained atop the Billboard album for a fifth week with her album “Red” (Big Machine) recording 208,000 sales, according to Nielsen SoundScan. The 64,000 albums reported on Wednesday represented a 10-fold increase; a compilation album released just two days after Ms. Rivera died, “La Misma Gran Señora” (Fonovisa), reached No. 38 on the overall Billboard album chart.

Article source: http://mediadecoder.blogs.nytimes.com/2012/12/20/the-breakfast-meeting-hollywood-adapts-to-gun-violence-and-senators-criticize-zero-dark-thirty/?partner=rss&emc=rss

Filed Under: Media Business Tagged With: bill carter, united states senators, whistle blower

DealBook: Britain Examines 4,000 HSBC Accounts in a Tax Haven

November 10, 2012 by NewsMaker Leave a Comment

Andy Rain/European Pressphoto AgencyA branch of HSBC in London. Britain’s tax authority is investigating more than 4,000 accounts in the British crown dependency of Jersey.

LONDON — The British tax authorities said on Friday that they were looking into a list of HSBC clients with bank accounts in the tax haven of Jersey, a development that adds to the bank’s legal woes.

Her Majesty’s Revenue and Customs, Britain’s tax authority, is investigating more than 4,000 accounts in Jersey that belong to British clients after receiving details from a whistle-blower. The list includes a drug dealer and a man convicted of possessing more than 300 weapons at his home in the south of England, The Daily Telegraph newspaper in London reported.

“We have received the data and we are studying it,” a tax authority spokesman wrote in an e-mailed statement. “Clamping down on those who try to cheat the system through evading taxes and over-claiming benefits is a top priority for us, and we value the information we receive from the public and business community.”

Jersey, the largest island in the English Channel, is a British dependency with its own tax system.

HSBC, Britain’s largest bank, is already part of an investigation into money laundering. The bank said earlier this month that it set aside an additional $800 million to cover potential fines from the money laundering case, bringing the total to $1.5 billion. The bank, which is negotiating a settlement with the American authorities, added that the actual fine could be even bigger.

In addition, HSBC, like other major British banks, has had to set aside cash to reimburse British customers who were sold inappropriate insurance products.

HSBC said Friday in a statement that the bank was “investigating the reports of an alleged loss of certain client data in Jersey as a matter of urgency.” HSBC said it had not yet been informed of any investigation but would fully cooperate with the authorities. “HSBC remains fully committed to adoption of the highest global standards, including the procedures for the acceptance of clients,” it said.

Prime Minister David Cameron of Britain has made the crackdown on tax evaders a priority for a government under pressure to increase revenue and reduce the budget deficit. After the financial crisis, banks face greater scrutiny from the authorities worldwide about how they conduct their business.

HSBC’s management was forced to apologize publicly for the problems that weighed on its earnings and share price as recently as Monday and has already started to change its compliance and oversight functions.

The money laundering scandal began when the United States Senate’s Permanent Subcommittee on Investigations accused HSBC of allowing some of its executives to let illegal behavior go unchecked for nine years, until 2010. In one example, the bank provided financing to Al Rajhi Bank of Saudi Arabia, even though some of the bank’s owners were linked to the financing of terrorism, according to the Senate report.

HSBC clients are also on another list that was in the spotlight this month. Kostas Vaxevanis, editor of the investigative magazine Hot Doc, was acquitted last week on charges of breaching privacy laws when he published a list of more than 2,000 Greeks believed to hold accounts at a Geneva branch of HSBC. The list was given to the Greek authorities two years ago by Christine Lagarde, then the French finance minister and now managing director of the International Monetary Fund, to help the government in Athens investigate evasion.

Article source: http://dealbook.nytimes.com/2012/11/09/britain-opens-inquiry-on-hsbc-over-tax-haven/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: claiming benefits, majesty, whistle blower

Bucks Blog: Weighing the Right Thing to Do

September 21, 2012 by NewsMaker Leave a Comment

As Paul Sullivan recounts in his Wealth Matters column this week, anyone considering the financial rewards of becoming a whistle-blower should fully consider all the possible fallout. A lawyer who has represented whistle-blowers, John Phillips, explained it this way: “You may find yourself unemployable. Home foreclosures, divorce, suicide and depression all go with this territory.”

In other words, the decision to become a whistle-blower should not be made lightly.

Other lawyers who handle these cases also cautioned against thinking that the recent $104 million whistle-blower award from the Internal Revenue Service to Bradley C. Birkenfeld is typical. The payouts from most cases, if they ever reach that point, are usually far, far less.

What would you do if you knew about something, perhaps in your workplace or among your circle of friends, that amounted to defrauding the government? Would you report it, realizing that you might be putting your livelihood and, perhaps, your own reputation on the line?

Article source: http://bucks.blogs.nytimes.com/2012/09/21/weighing-the-right-thing-to-do/?partner=rss&emc=rss

Filed Under: Your Money Tagged With: financial rewards, lawyers, whistle blower

DealBook: Sometimes, It Takes a Thief to Catch One

September 12, 2012 by NewsMaker Leave a Comment

Bradley C. Bower/Bloomberg NewsThe I.R.S. said this week that Bradley Birkenfeld, a former UBS banker, would receive a $104 million whistle-blower award.

It’s enough to make many criminals jealous. The $104 million whistle-blower award by the Internal Revenue Service to Bradley Birkenfeld demonstrates how the government is willing to use a thief to catch a thief.

The question is whether there may be a perverse incentive for people to first help others violate the law in the hopes of later garnering a fat check. The eye-popping reward may be a lure for others to search high and low for fraud, and perhaps even help commit a crime for the sake of the potential reward. But there are protections built into federal whistle-blower programs that try to limit how much criminals can profit from the government for their misdeeds.

In Mr. Birkenfeld’s case, there is some evidence that he tried to do the right thing while he was still working at UBS in assisting wealthy American clients hide assets abroad to avoid paying taxes. After raising questions internally about the legality of the program and being rebuffed, he turned to the I.R.S. and became a whistle-blower.

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The information he provided was crucial to blowing the lid off Swiss bank secrecy, helping the I.R.S. and other countries pry information from banks about foreign clients that has largely undermined a tradition of shielding assets that goes back centuries.

The $104 million payment is almost a pittance compared with the taxes and penalties the government continues to collect from wealthy taxpayers fearful of the inevitable knock at the door if they don’t turn themselves in.

Mr. Birkenfeld pleaded guilty to conspiracy to evade taxes and received a 40-month prison term. His conviction related to assisting a client of UBS, so his $104 million award is based on tax evasion by others and is unrelated to his offense. He is residing in a community correctional facility as he finishes his sentence, and is the rare prisoner who does not need to look for a job when he is released from custody later this year.

The government makes deals with criminals all the time, therefore whistle-blower programs should not be viewed as outliers.

In criminal prosecutions, defendants frequently plead guilty to reduced charges along with a favorable sentencing recommendation in exchange for cooperating against others. There is a substantial discount given to those who agree to assist the government rather than take their case to trial.

For example, in the recent prosecution of Raj Rajaratnam for insider trading, Anil Kumar received two years’ probation for what prosecutors described as “extraordinary cooperation” while Mr. Rajaratnam is serving an 11-year prison term after his conviction.

A section of the federal bribery law makes it a crime to offer “anything of value” to a person “with intent to influence the testimony under oath or affirmation” as a witness at a trial. But the federal courts have refused to find that a plea agreement is a type of bribe — at least as long as there is not a direct payment to influence the testimony.

The whistle-blower programs that award a portion of the government’s recovery to the person who supplies information are in many ways an extension of the deals made with individual defendants. These programs do try to impose some limits on the potential reward if the whistle-blower is also involved in the wrongdoing.

The I.R.S. permits a reduction of an award if whistle-blowers “planned and initiated the actions” involved, and precludes a payment if whistle-blowers were convicted based on their role in the violation.

Other government agencies have also taken steps to remove any incentive for people to commit crimes for the sake of rewards.

The Securities and Exchange Commission’s whistle-blower rules, put in place as part of the Dodd-Frank Act, deduct from an award any amount traceable to the person’s own misconduct. The rules also allow the S.E.C. to reduce a payment based on the whistle-blower’s culpability or involvement in the violations, and prohibit an award if the person obtained the information illegally.

The oldest whistle-blower program is under the federal False Claims Act, which allows individuals to sue on behalf of the government, called a qui tam action, to recover amounts paid out based on false or fraudulent submissions.
Before Mr. Birkenfeld’s award, the largest whistle-blower payment had been $96 million for information about violations by GlaxoSmithKline that resulted in a $750 million settlement in 2010.

A provision of the False Claims Act provides that if the whistle-blower “planned and initiated the violation,” then the award could be reduced “to the extent the court considers appropriate.” The provision goes a step further by prohibiting any payment if the person “is convicted of criminal conduct arising from his or her role in the violation.” That provision is broader than the I.R.S. rule by making any conviction related to the violation grounds to block an award.

There are other risks for those who might have participated in wrongdoing and are hoping to become the next Bradley Birkenfeld.

The whistle-blower programs effectively require a person to be the first one in the door with valuable information. If the agency already knows about the violations, or the information has become public, then the person is not an original source and cannot receive a reward.

Moreover, the payment depends on the recovery of money and placement of penalties. This can take years, particularly for tax cases because the award will not be made until all appeals have been exhausted.

Becoming a whistle-blower is not something to aspire to, either. While there are provisions in the laws preventing retaliation, the decision to blow the whistle on one’s employer and co-workers is not an easy one. Once undertaken, blowing with whistle can trigger substantial personal costs, and perhaps even the risk of jail time.

While it may be easy to say in hindsight that a 40-month prison term is worth $104 million, there was strong resistance to give anything to Mr. Birkenfeld. So the pot of gold at the end of the rainbow may never appear, or can take years to be reached.

And, as the I.R.S. points out, “All awards will be subject to current federal tax reporting and withholding requirements,” so you still owe taxes on it.

Peter J. Henning, who writes White Collar Watch for DealBook, is a professor at Wayne State University Law School.

This post has been revised to reflect the following correction:

Correction: September 12, 2012

An earlier version of this post misspelled the surname of the former UBS banker who received a whistle-blower award from the I.R.S. It is Bradley Birkenfeld, not Birkenfield.

Article source: http://dealbook.nytimes.com/2012/09/12/sometimes-it-takes-a-thief-to-catch-one/?partner=rss&emc=rss

Filed Under: Business News Tagged With: conspiracy, swiss bank, whistle blower