DOJ Launches Probe Of Individuals Who Worked In Deutsche Bank's Mortgage Unit

Deutsche Bank employees who were engaged in the actual trades that ended up costing the bank a $7.2 billion settlement at the end of 2016, and who were hoping to quietly get away without criminal or civil charges, are set for disappointment because as IFR reports the DOJ is probing for potential fraud by individuals who worked in Deutsche Bank's mortgage unit in the run-up to the financial crisis. 

According to IFR's sources, "the investigation of former Deutsche staffers is a push to hold individuals accountable for their role in the housing crisis." The probe follows Deutsche's multi-billion settlement in December with the DOJ over toxic residential mortgage securities sold between 2006 and 2007. Observers were surprised when no individuals who worked at Deutsche were named in the settlement, leaving shareholders footing the bill.

Now, the DOJ's fresh probe leaves open the possibility of pursuing individuals who had worked at Deutsche. Confirming that there has been no individuals have been exempt from personal liability, in the January 17 press release outlining the facts, finalization and terms of the settlement, the DOJ said that the settlement with Deutsche does not release any individuals from potential criminal or civil liability.

Speaking of which, has anyone seen Greg Lippman these days?

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Separately, and presaging what will soon take place in Deutsche Bank, Reuters writes that the DOJ in December named two former Barclays RMBS staffers in a civil suit it filed against Barclays and some of its US affiliates. The complaint against Barclays alleged that the bank and its staffers fraudulently sold tens of billions of dollars of RMBS, and repeatedly misled investors about the quality of the mortgages backing those deals. The individuals named in the Barclays complaint, Paul Menefee and John Carroll, have obtained their own legal counsel, a Barclays spokesperson said. Menefee was Barclays' head banker on its subprime RMBS securitizations, and Carroll was Barclays' head trader for subprime loan acquisitions.

"It is surprising and extremely disappointing that the government decided to file this highly unusual lawsuit. John Carroll intends to challenge these ill-conceived and baseless allegations, and expects to be fully vindicated," Crowell & Moring partner Glen McGorty, who is representing Carroll, said in an emailed statement to IFR. A response to the complaint against Carroll has not yet been filed, McGorty said.


Lawyers for Menefee did not immediately respond to requests for comment. No filing has been made on behalf of Menefee, according to a search of the federal court docket. Barclays previously said it rejects the claims made in the complaint.

Reuters adds that "Barclays considers that the claims made in the complaint are disconnected from the facts. We have an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands. Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity."

We look forward to the Deustche Bank - and of course Spiegel - outrage, when a similar judgment is levied against the largest German bank.