Banker Probe

Deutsche Bank, Accused of Manipulating Interest Rates, May See CEO Face Charges

Fitschen and Jain
Mr. Fitschen and Anshu Jain are co-chairmen of Deutsche Bank's management board.
  • Why it matters

    Why it matters

    Germany’s biggest bank might see one of its two co-chief executives go on trial, putting more pressure on the financial institution, which is embroiled in several legal proceedings.

  • Facts


    • Co-chief Executive Jürgen Fitschen intends to fight an indictment and stay in office.
    • He is leading changes to prevent fraudulent acts from being committed within the bank.
    • The bank already faces legal proceedings over alleged manipulation of interest rates and currencies.
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Mr. Fitschen just wanted to do one thing this summer: relax.

But bank chief executive, who shares power with Anshu Jain, ended up spending more time on the phone than he intended. His staff had plenty of questions that need answers and even his lawyer need to speak with him.

The reason for all attention: The Munich state prosecutor might sue Fitschen over fraud in a trial a few years ago. The indictment has not yet been filed but the district court intends to send it later this month.

The possibility of going to court occupies Fitschen’s time as no other issue. The prosecution could destroy his reputation as a respectable banker. “I am not aware of any guilt,” the executive recently told a small group of insiders. Whatever the prosecutor puts forward against Fitschen, the executive is expected to fight hard for his acquittal – and his name. Resignation, he told the group of insiders, is not an option.

Billionaire Bernie Ecclestone, the Formula One owner who settled for $100 million in Germany over charges of bribery, is not an example for Fitschen. Unlike Ecclestone, Fitschen is not afraid of a years-long legal dispute with the Munich prosecutors. “Fitschen seeks a full confirmation of his innocence, not a quick trial,” a person close to the Deutsche Bank chief executive said.

Senior public prosecutor Christiane Serini has sought out Fitschen due to his role in the compensation process of late media entrepreneur Leo Kirch.  He joins several others from the bank, including former chief executives Rolf-E. Breuer and Josef Ackermann, former executive Tessen von Heydebreck, and former chairman Clemens Börsig.

“The investigation has now been closed,” a Munich prosecution spokeswoman said.

Kirch’s business went bankrupt in 2002. He and his heirs accused Deutsche Bank of having played a role in the company’s bankruptcy. Kirch died in 2011. A compensation process between the heirs and the bank extend over the past few years but ended after Deutsche Bank settled in February this year with heirs for €925 million ($1.2 billion).

That wasn’t enough for prosecutor Serini, who refuses to let Deutsche Bank executives off the hook. She is accusing them of having lied during the compensation process. Fitschen was an accomplice, according to the prosecutor, because he had not corrected the false statements of his board colleagues.

All bank executives deny the charges.

As is usual with extensive court cases, the Munich chief prosecutor and the Bavarian justice ministry saw the indictments before it was sent off to the appropriate district court, according to media reports.

The Fitschen trial is the second one involving an active Deutsche Bank chief executive. Ten years ago, Ackermann had to respond to charges of embezzlement in the German telecommunications and engineering company, Mannesmann, by Britain’s Vodafone in 2000. Mr. Ackermann was a member of Mannesmann’s supervisory board at the time. He ended up settling for €3.2 million.

The bank executives still don’t know precisely who will be indicted. They will learn that when the court sends them the indictment. Nevertheless, there is already speculation about  Fitschen resigning if put on trial.

Deutsche Bank is accused of being involved in several global scandals, including manipulation of interest rates and currencies.

In response, the bank has prescribed itself a change of culture, headed by Fitschen, who is known in the industry for his integrity. But can he still convincingly lead the bank’s ethical changes if he goes on trial?

Fitschen said earlier this year that he would fight until the end.

Can Mr. Fitschen still convincingly lead the bank's ethical changes if he himself risks facing trial?

The supervisory board backs Fitschen. The board and the executive committee have obtained legal advice from two experts. Both have concluded that Fitschen was not obliged to correct the possibly false statements of his ex-colleagues during the compensation trial.

With this backing, Fitschen rejected in March an offer from prosecutor Serini to dismiss the case on payment of a misdemeanor penalty, which can be €500,000 at maximum. Fitschen also turned down the proposal because he was worried that the German financial regulator, Bafin, might take notice of the penalty.


Deutsche Bank
Cleaning up their business. Source: Reuters.


Currently, he does not have to be afraid of the regulator. “Generally, the authority assumes innocence. Only once a judgement is made, should we consider the trail’s outcome,” a spokesman of the supervisory authority said.

In 2009, prosecutor Serini indicted former Deutsche Bank chief Breuer for fraud while on trial. It t took two years for the indictment to be approved. But the evidence was not sufficient, and Breuer only had to pay a fine.

This time, Mrs. Serini is expected to be prepared better. The indictment is said to be longer than 600 pages. Judge Peter Noll, who  recently ruled in the bribery trial of Bernie Ecclestone, will preside over the case.

If the indictment also targets Fitschen, it is likely that main proceedings will also be started against him and he will have to go on trial. This will require judge Noll to see sufficient suspicions of wrongdoing. And only if he is certain that the indictment lacks sufficient  evidence can he reject it. The prosecutor has the option to appeal this decision. In practice, it is rare that an indictment is not approved.

Fitschen’s fight to prove his innocence is seen as one of the biggest challenges he has faced in his career.

Translation by Gilbert Kreijger

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