Deutsche Bank Again Under Fire From Internal Whistleblower Accusing Bank Of Fudging Numbers

Tyler Durden's picture

Back In May 2009 Zero Hedge was the only website to post (following a NYT Dealbook takedown for reasons unknown) the lament of one, now former, Deutsche Bank employee and whistleblower, Deepak Moorjani, who made it very clear that going all the way back to 2006, Deutsche Bank was allegedly fabricating data, and misleading investors about its commercial real estate holdings, courtesy of a lax regulatory strcuture and the "lack of a system of checks and balances". To wit: "At Deutsche Bank, I consider our poor results to be a “management debacle,” a natural outcome of unfettered risk-taking, poor incentive structures and the lack of a system of checks and balances. In my opinion, we took too much risk, failed to manage this risk and broke too many laws and regulations. For more than two years, I have been working internally to improve the inadequate governance structures and lax internal controls within Deutsche Bank. I joined the firm in 2006 in one of its foreign subsidiaries, and my due diligence revealed management failures as well as inconsistencies between our internal actions and our external statements. Beginning in late 2006, my conclusions were disseminated internally on a number of occasions, and while not always eloquently stated, my concerns were honest. Unfortunately, raising concerns internally is like trying to clap with one hand. The firm retaliated, and this raises the question: Is it possible to question management’s performance without being marginalized, even when this marginalization might be a violation of law?" The story was promptly drowned, despite our attempts to make it very clear just what practices the bank was engaging in in the follow up exclusive titled "One Whistleblower's Fight Against Goliath Over the Definition of Risk." Today, the questionably legal practices by Deutsche Bank are once again brought to the forefront with the Propublica article of former WSJ journalist Carrick Mollenkamp titled "Deutsche Analyst Sounded Alarm When Asked to Alter Numbers." This is the second time a pseudo-whistleblower has spoken out against an endemic culture of fraud at the German bank in two years. And nobody cares of course, for obvious reasons - the Zen-like tranquility of the
status quo may never be disturbed, or else the endless crime and corruption lurking in the shadows will be exposed for all to see.

Just how much deep will this particular rabbit hole lead? Alas, not deep at all, as any in depth analysis of the actions taken by DB in 2007 will expose that they were not unique at all, and virtually every other bank engaged in precisely the same type of wholesale fraud, which however may result in people going to jail. Something which the status quo has said can not happen.

Mollenkamp's article can be summarized simply as follows: a low-level analyst was told to fudge numbers to make number attractive. While this is a practice which everyone who has worked on Wall Street has engaged in at some point, the implications here are just how far such "fudging" may have gone, who may have been responsible, and at its very core, why nobody is held accountable even following the trillions in real estate losses following years of in kind lies perpetuated by everyone else. That we realize, is a moot point: after all the whole point of the status quo is that nobody can be is guilty, if everyone is guilty.

From ProPublica:

At a time when mortgage-backed securities were imploding and customers were fleeing the market, a junior analyst at Deutsche Bank AG protested when he was asked to alter the numbers in a spreadsheet to make a Deutsche security look less risky to ratings agencies, according to a person with knowledge of the matter.

 

The analyst, this person said, was asked by a mid-level Deutsche executive in late 2007 to make it appear that the investment would produce more cash than the bank actually expected at certain time points.

 

The request came at a crucial moment. In the last months of 2007, investors had grown skittish about such investments amid signs that the housing bubble was deflating, if not bursting. Up and down Wall Street, banks were trying to persuade ratings agencies that large portions of their mortgage-backed securities merited the coveted AAA stamp, meaning that they posed negligible risks of default. The analyst was asked to alter the spreadsheets in order to get a better rating, the person said.

 

The analyst's protest prompted an internal investigation conducted by a law firm, according to five current and former Deutsche employees. The protest and probe have not been previously reported.

And so forth. Read the whole thing here but there will be nothing at all surprising or earthshattering to those familiar with how Wall Street used to operate, and how it still operates.

Unfortunately.