Police raid Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB).
Frankfurter Allgemeine Zeitung has:
The investigation into a million EUR VAT-fraud with CO2-emission certificates expands. The Frankfurt district attorney has ransacked several rooms in Deutsche Bank offices, as well as apartments in Frankfurt am Main, Berlin and Düsseldorf. The district attorney’s office announces 25 Deutsche Bank employees are supposed to be suspected of serious tax-fraud, money laundering, and attempted obstruction of justice. An arrest order has been issued against 5. There is suspicion that bank employees have kept evidence from authorities.
Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) announced that the investigation is also aimed at Co-CEO Jürgen Fitschen. Fitschen and another board member, Stefan Krause are supposed to have signed the VAT-declaration in 2009 – these have in the meantime been voluntarily corrected: ”Deutsche Bank stands by the contention that the correction was forwarded in due time, as opposed to the opinion of the district attorney,” the bank explained.
Deutsche Bank assured that they would continue to cooperate extensively with the authorities. The bank had this year suspended, but not fired, five employees on the suspicion of involvement in this case. It is not clear if it is the same five employees.
The national operation had about 500 officers involved. The federal police ran 2 busses and more than 20 personnel carriers in front of the twin towers and other Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) office buildings in the center of Frankfurt. A bank employee, wishing not to be named, reported the raid started at 9.15 am. Eight armed officers in blue overalls loitered in the lobby.
The First raid in more than two years
”The district attorney had, up to now, investigated seven bankers and only for aiding and abetting tax-evasion. Investigators searched in April of 2010 through several European countries with 230 sites; among them the Deutsche Bank head quarters in Frankfurt. At that time an unknown source had warned of the raid the day before. The investigation had resulted in further suspicions”, said Leading Senior District Günter Wittig.
The search is in connection with tax-fraud in CO2-emission certificates. The state court in Frankfurt am Main sentenced six investment bankers between three and seven years and 10 months imprisonment for serious tax-fraud. During that trial seven Deutsche Bank employees attracted suspicion of aiding tax-evasion.
Judge criticized Deutsche Bank
The court president, Martin Bach, specifically criticized Deutsche Bank in the ruling of the large scale tax-fraud. While other banks had desisted in pursuing business relation with the accused, due to lack of experience and lacking competence, Deutsche Bank had cooperated willingly without much checking. In one incident, the cooperation in million EUR size businesses followed after only an interview of ten minutes.
Suspicion of cooperation with international gang
The accused were at the time of the crime between September 2009 and April 2010, at the CEO’s of businesses in Frankfurt am Main, Hamburg and Paderborn. CO2-emission certificates were traded over several companies in several countries. Expensive CO2-emission certificates were bought without VAT, but reported in the monthly tax-return to have paid million EURs in VAT. The VAT-fraud was blurred through a large number of agents.
During the investigation after the trial, it became evident that further employees of Deutsch Bank were persons of interest. The dealers are supposed to have cooperated with an international gang.
Jürgen Fitschen: In 2005 he was appointed Head of the newly established Regional Management team worldwide and CEO Germany, based in Frankfurt. As CEO Germany, he is also Chairman of the Management Committee Germany. In these capacities Fitschen joined the Deutsche Bank Management Board in 2009.
Anshu Jain: Since 2002, he has been in the Deutsche Bank Group Executive Committee (GEC) and was formerly head of Global Markets and joint head of the Corporate and Investment Bank from 2004. His previous roles included head of fixed income sales and trading, global head of derivatives and emerging markets, as well as the global head of institutional client coverage.
In April 2010, Deutsche Bank reported first quarter net revenues of €9 billion, of which the Corporate and Investment Bank contributed net revenues of €6.6 billion, up from €4.9 billion in the first quarter 2009.
Jain has been the subject of considerable speculation in the media that he could succeed Josef Ackermann as Chief Executive of Deutsche Bank. He earned almost €12 million in 2010 and is, therefore, the best earner at Deutsche Bank. In comparison, CEO Josef Ackermann earned €8.8 million in 2010.
Quote on LIBOR rigging:
Jain Criticized in Absentia as Germany Holds Hearing
Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) co-Chief Executive Officer Anshu Jain is facing criticism from politicians and his own predecessor for a decision not to attend a German hearing on rate rigging today.
Jain stayed away from the discussions about banks’ alleged manipulation of the London Interbank Offered Rate at parliament’s Finance Committee in Berlin. Stephan Leithner, the bank’s head of compliance, went in his place.
“Jain just didn’t want to be associated with the proceedings,” Konrad Becker, an analyst with Merck Fink & Co. in Munich, said by telephone yesterday. “He isn’t the investment bank chief anymore, he’s the CEO. He’s trying to distance himself.”
Regulators from Canada to Switzerland are investigating whether more than a dozen banks, including Deutsche Bank, Barclays, UBS AG (NYSE:UBS) and Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) were colluding to rig Libor, the benchmark for more than $300 trillion of securities, or hiding their true cost of borrowing. Like former Barclays PLC (LON:BARC) (NYSE:BCS) CEO Bob Diamond, who resigned after his bank admitted to manipulating the rate, Jain led his firm’s investment bank during the period in question. Deutsche Bank denies any wrongdoing by leading executives.
When you sell goods and services within the EU, you report VAT separately but do not invoice it, only inform the customer of the VAT amount on the invoice. The customer reports the import VAT; but does not deduct it in incoming VAT, as the VAT is supposed to be invoiced to the customer’s client in the customer’s country (if you follow me). Value added tax is claimed at the “end user”. The fraud is possibly that this VAT, somewhere along the line, has “slipped” from the non-deductable space into the deductable – easy mistake, and an easy “mistake” to track, as the VAT-number of all incoming and outgoing VAT is to be given specifically – any accounting program has the ability to print out that list from the client library.
I don’t quite know if these chaps forward CV’s in connection with job-applications or rap-sheets.
This investigation is totally home grown German, as they will have all the data needed for tracking. Computer files are exchanged between countries and faulty VAT-numbers can be checked – laboriously but absolutely routine. VAT-fraud is in Europe quite a serious crime – even the attempt carries a stiff penalty, even if only due to negligence! You see, the prison sentences to the business owners – they could be nailed; but the bankers went free: That is perhaps the background for the obstruction of justice charges.
The serious charge (and interesting one for an American audience) is the money laundering charge, something that will very much interest the IRS and intelligence community. That is presumably collateral evidence from the primary investigation.
The implication of senior management is clearly from employees that have not only buckled under interrogation (if not, where did the police know where to look), but pressed into the shape of a hood ornament.
This is a reflection of where junior managers have taken the rap and are very dissatisfied with their superiors. Any competent bureaucrat will of course cover his back for this eventuality.
There are more ways to proceed: One is forcing senior management to inform on further subordinates. Lots and lots of productive administration and police work.
(I think, I saw an evil glint in Wolfgang Schäubles eye when he admonished the Spaniards to go after tax-evaders – hard to tell, as his gregarious smile could make Dracula loose appetite – clearly he had something like this in mind. Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) is not going to get favors)
The other track is at least as interesting, as it will clarify following the anti-terror paper trail for the US intelligence. Certain employees may also be induced to ease their conscience and hope for some clemency.