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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.

 

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Thu, 01/19/2012 - 12:42 | 2078131 GeneMarchbanks
GeneMarchbanks's picture

'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.'

Yeah, but you're missing the point: mission discredit EU and specifically the biggest pillar i.e Germany. That has been the trend and should continue since that is all the Empire of Illusion has left.

Thu, 01/19/2012 - 12:50 | 2078179 Careless Whisper
Careless Whisper's picture

The Careless Whisper News Update & Threadjacking

 

Meet Carol Paul. Ron Paul's Wife. His Only Wife. 55th Wedding Anniversary On Feb 1; VIDEO

http://www.youtube.com/watch?v=7Czyw135xec

Movie Studio Robs Michigan Employees Pension Fund Of $18 Million

http://www.detroitnews.com/article/20120119/OPINION03/201190417/State-pe...|newswell|text|FRONTPAGE|p

Mexican Cartels Using Armored Vehicles; 12 Gunmen, Lots Of Drugs

http://latino.foxnews.com/latino/news/2012/01/18/mexican-cartels-moving-...

New President Of Guatemala Wants To Implement Ron Paul Plan To Decriminalize Drugs; Put Cartels Out Of Business

http://latino.foxnews.com/latino/news/2012/01/18/guatemalas-otto-perez-m...

Earned 12% Of Income From Investment Banking, Rest From Trading; GoldmanSachs Says Its Not A Hedge Fund

http://www.nypost.com/p/news/business/the_cutting_kind_pC1p4R1GThQ2dOZt1...

Congressman Jared Polis, Former Internet Entepreneur Says SOPA Will Kill Internet

http://www.forbes.com/sites/erikkain/2012/01/18/an-interview-with-rep-ja...

AP Opens News Office In North Korea; VIDEO

http://www.youtube.com/watch?v=2vuQ4wY6t_s

 

Thu, 01/19/2012 - 13:18 | 2078297 Oh regional Indian
Oh regional Indian's picture

AP in NK...Game UP!!!!! The Trojan is in the house.

By the way, as a further jack of thread, a sobering in-sight for GoldBugs. From my perspective anyways.

shattering-midass-curse-gold-de-spell-ed/

ori

 

Thu, 01/19/2012 - 14:28 | 2078611 Carl Spackler
Carl Spackler's picture

Huh, the AP has always been a sympathizer to communism.  This bias is obvious in all of their attempts at journalism.

Thu, 01/19/2012 - 17:57 | 2079403 rocker
rocker's picture

The banks want to tell you that all their earnings are 100% clean.  Just like their bonuses.  That is how they get the bonus, right?

Thu, 01/19/2012 - 13:08 | 2078253 slaughterer
slaughterer's picture

Never forget: CDO star/subprime short machine/Gordon-Gekko-wannabe Greg Lippman worked at DB during the height of the frenzy... until DB got rid of him.    

Thu, 01/19/2012 - 14:41 | 2078655 Ruffcut
Ruffcut's picture

All the banks are fudge factories and cronies politicos' like barney frank are the fudge packers.

Thu, 01/19/2012 - 12:41 | 2078139 SHEEPFUKKER
SHEEPFUKKER's picture

How do I get a degree in whistle blowing? 

Thu, 01/19/2012 - 12:47 | 2078164 bnbdnb
Thu, 01/19/2012 - 12:49 | 2078174 DoChenRollingBearing
DoChenRollingBearing's picture

A good friend of mine blew the whistle on a cheating scandal at the nexus of the government and aviation system back in the 1980s.  SAFETY issues were involved.  He blew the whistle and got fired.  One of the corrupt guys is still working today...  Think about that the next time you fly...

Whistle blowwing, while morally a plus, does your career no good.

Thu, 01/19/2012 - 12:58 | 2078214 lizzy36
lizzy36's picture

Agree 10000%.

Powerful interests collude to keep the scam going. Getting caught in the middle, being labelled "not a team player", is a CLM.

Not suprising that mediocrity is what American does best, and American exceptionalism is a myth best served to sheeple who want to believe they to could be millionaires.

Thu, 01/19/2012 - 13:21 | 2078307 Oh regional Indian
Oh regional Indian's picture

Well, try crushing anybody's pet paradigm, same result, no?

ori

Thu, 01/19/2012 - 13:07 | 2078251 karzai_luver
karzai_luver's picture

Yep, you blow the whistle be prepared to have it shoved down your throat.

I have known several and they did not have a Hollywood ending.

The results were empty and they were branded not a team player.

Blackballed and ended up either paid off to shut up or busted.

Disaster.

 

Thu, 01/19/2012 - 15:21 | 2078836 ucsbcanuck
ucsbcanuck's picture

You're almost better off looking for alternative employment or just resigning rather than whistle blowing. 

Thu, 01/19/2012 - 12:50 | 2078175 disabledvet
disabledvet's picture

By surviving the experience.

Thu, 01/19/2012 - 12:53 | 2078144 Dr. Engali
Dr. Engali's picture

This is how they screwed Ron Paul in Iowa:

 

http://caucuses.desmoinesregister.com/2012/01/19/register-exclusive-2012-gop-caucus-count-unresolved/

"Results from eight precincts are missing " 

Of course the rebubs claim it could have affected Mitt.

Thu, 01/19/2012 - 12:42 | 2078146 CvlDobd
CvlDobd's picture

If up 7% is under fire, feel free to put my feet to the fire anytime!

Thu, 01/19/2012 - 12:48 | 2078169 Tyler Durden
Tyler Durden's picture

Actually, lies and fraud do catch up. Of course since everyone is an HFT algo, everyone shorted at the top and went long at the bottom.

Thu, 01/19/2012 - 12:53 | 2078191 disabledvet
disabledvet's picture

Well..."not everybody." no one saw Fukushima and the Arab Revolt coming. Truly "Mayhem Corner's" coming out party. And of course "The Expendables" (aka the entirety of the American Defense Establishment) is right in the middle of it. Ain't it a beautiful thing!

Thu, 01/19/2012 - 12:57 | 2078213 CvlDobd
CvlDobd's picture

I hear that brother!

I'm pretty bearish but I need to make a few dimes here and there. Doing it on the short side has been difficult. I think it should be making an appearance soon but this market is behaving like one hopped up on QE. Not announced QE, but the kind sheep dog an I are calling. The one that's going on behind the scenes.

Q4 2010 redux anyone?

Thu, 01/19/2012 - 12:43 | 2078150 Rainman
Rainman's picture

Pay attention to the emergency power memos : " Bank earnings will be whatever they want them to be."

Thu, 01/19/2012 - 12:44 | 2078155 Lobbelt
Lobbelt's picture

*tries to turn this into a bullish article for gold*

 

Gold, bitchez!

Thu, 01/19/2012 - 12:44 | 2078158 SheepDog-One
SheepDog-One's picture

Fudged numbers from Central Banksters? No WAY!

Thu, 01/19/2012 - 12:45 | 2078161 tony bonn
tony bonn's picture

"Is it possible to question management’s performance without being marginalized..."

i'm afraid not, babycakes....and just think - db hired only the best and brightest....so you know it all good....

and for god's sake, don't ever ask to see a non forged version of barry soetoro's birth certificate....

www.obamacrimes.com

 

Thu, 01/19/2012 - 12:47 | 2078167 orangedrinkandchips
orangedrinkandchips's picture

Same shit....different company....

 

nothing new...nothing wil change....Must applaud them for trying...but it's easier to turn back the tides than do what home boy is tryin to do....

Thu, 01/19/2012 - 12:53 | 2078189 Bithead1
Bithead1's picture

I did the same thing with a financial institution here in the US.  The whole system is corrupt (shocker I know)and to blow the whistle on it only brings years of hardship on the person trying to protect the consumer.  

Thu, 01/19/2012 - 12:54 | 2078193 Joe Davola
Joe Davola's picture

Speaking of fudge, the whistleblower is most likely the only player in the saga who will find out how it gets packed.

Thu, 01/19/2012 - 12:54 | 2078196 OneEyedJack
OneEyedJack's picture

ECB needs 1 Trillion

Obama needs 1.2 Trillion

IMF needs 500 Billion

Nothing to see here....move along now

Thu, 01/19/2012 - 12:58 | 2078211 Dre4dwolf
Dre4dwolf's picture

When banks break the law, they literally go to where the law is written and BREAK IT, usually by carpet bombing it with creidt cards.

 

Thu, 01/19/2012 - 12:58 | 2078215 disabledvet
disabledvet's picture

"bringing your production forward" to make numbers vs "altering spreadsheets to make false representations to regulators, investors and the bank itself" are two SLLLLightly different things. And no, this is not a secret. One of the bldging's smashed on 9/11was the DB HQ (former Bankers Trust which DB bought.) Suffice to say all of The Street has known for over a decade that "DB can't run the hedge fund formerly known as Bankers Trust."

Thu, 01/19/2012 - 13:12 | 2078263 fuu
fuu's picture

"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"

 

No.Fucking.Way.

Thu, 01/19/2012 - 13:15 | 2078275 LetThemEatRand
LetThemEatRand's picture

"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".

I'm confused.  The Red Team keeps saying that less regulation is the answer to the problem, not the problem itself.

Thu, 01/19/2012 - 13:34 | 2078378 fightthepower
fightthepower's picture

Who will regulate the regulators when they themselves are corrupt?

Thu, 01/19/2012 - 13:34 | 2078379 fightthepower
fightthepower's picture

Who will regulate the regulators when they themselves are corrupt?

Thu, 01/19/2012 - 13:31 | 2078365 847328_3527
847328_3527's picture

"Fudging" bank numbers is illegal?

Thu, 01/19/2012 - 13:38 | 2078402 Hephasteus
Hephasteus's picture

Deutche bank knows how to hide this.

http://www.youtube.com/watch?v=rNf0jkgwZ90

Thu, 01/19/2012 - 14:34 | 2078631 Dubaibanker
Dubaibanker's picture

This quote of Tyler ....."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." reminds me what Taleb has espoused in the 'Black Swan of Cairo"

Thu, 01/19/2012 - 14:45 | 2078664 AldoHux_IV
AldoHux_IV's picture

I'm surprised that these whistle blowers aren't deemed terrorists and just thrown away-- how dare they try to disrupt the ponzi! Long live the fraud that is our financial system.

Thu, 01/19/2012 - 14:53 | 2078689 Voodoo-economist
Voodoo-economist's picture

well, nothing new here. Policies, ethics statements, rules as well as legal compliance statements etc. are for the outside sheep but certainly not for the people inside, doing gods work. If a system is designed to reward the people that cheat most, then its no surprise that management circles are full of cheaters, liars and underperformers. And certainly not just at DB.

Thu, 01/19/2012 - 17:42 | 2079363 financial apoca...
financial apocalyptic contagion's picture

man fuck deutsche i was rejected in the final interview round for the investment banking internship
they can suck my dick

Thu, 01/19/2012 - 18:36 | 2079520 Finance Addict
Finance Addict's picture

Finally, a more complete picture starts to emerge. We all want to know, "How did the ratings agencies get it so wrong?" Especially since the MBS underlying the CDOs have been empirically proven to be much worse than MBS that did not get packaged up into structured products (see this: http://financeaddict.com/2012/01/how-we-went-from-cdo-to-cd-no/)

Turns out they were incompetent, captured, but also lied to. 

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