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Deutsche Bank Pays More than $16M to Settle SEC Charges of FCPA Violations

Posted  August 30, 2019

Last week, the SEC announced that German-based banking giant Deutsche Bank agreed to pay more than $16 million to settle charges it violated the Foreign Corrupt Practices Act (FCPA) by hiring relatives of foreign officials in China and Russia to get investment banking business.  See SEC Press Release.  According to the SEC’s order, these so-called “referral hires” bypassed the bank’s merit-based hiring process and were often not qualified for the positions they were given, or at the very least, were less qualified than applicants hired through the Deutsche Bank’s formal hiring process.

Included among the specific referral hires the SEC pointed to were:

    • The daughter of the chairman of large state-owned enterprise whose internal interview record reported: “She is an average-level candidate based on the interviews but failed 2 tests which means she is not good at analysis. I’d suggest we reject the candidate if it’s not a must hire case.
    • An individual whose mother was an executive at one state-owned enterprise and whose father was the chairman of another and who, among other things, had his resume revised by a Deutsche Bank employee and interviewed poorly despite having a “cheat sheet” that included interview questions and acceptable responses in advance of the interview. Interview notes reported “interviewers did not like him, thought he was one of the worst candidates they interviewed, and thought he showed very little interest or understanding of markets/finance/current affairs.”
    • The son of the chairman of a state-owned enterprise who was twice rejected by Deutsche Bank compliance because of his familial relationship but was hired nonetheless and despite repeatedly failing the bank’s employment test and eligibility criteria.

The FCPA prohibits U.S. companies, foreign companies subject to U.S. regulation, and individuals from bribing foreign government officials to obtain or retain any kind of business advantage.  It also imposes certain record keeping and internal control requirements.  The statute broadly applies to any payment intended to influence a foreign official to use his or her position to assist a company in obtaining, retaining, or securing any kind of business advantage.  This could include payments or inducements to avoid contract termination; secure favorable tax treatment; evade taxes, penalties or customs duties; obtain government action to foreclose competition; or circumvent regulations or licensing requirements.

Bribery typically takes the form of money and is often disguised as consulting fees or commissions given through intermediaries.  But it can also comprise virtually any form of consideration or thing of value, including gifts, meals, travel, and entertainment.  As the present enforcement action shows, it can also be in the form of providing employment.  Violations of the FCPA are investigated by the SEC and DOJ.  Whistleblowers with knowledge of FCPA violations may be able to make a claim to the SEC Whistleblower Program, which provides awards for whistleblowers.  Whistleblowers do not need to live in or be citizens of the United States and it is common for international whistleblowers to have important evidence of FCPA violations.

Please contact us if you have any information on any potential fraud in this or any other area and would like to have a confidential conversation with one of Constantine Cannon’s experienced whistleblower lawyers.


Tagged in: FCPA, Importance of Whistleblowers, SEC Whistleblower Reward Program, Whistleblower Case, Whistleblower Eligibility, Whistleblower Rewards,