Crimes Without Criminals Redux

As all those people who have paid vast sums to Trump cronies and donated vast sums to the Trump campaign wait to see if their Trumpian equivalent of papal indulgences for this life will be accepted, let’s not forget that Trump was earlier handing out pardons like candy to his criminal cronies. Paul Manafort, Roger Stone, and Mike Flynn were all rewarded for their omerta. At the same time, over at the DOJ and SEC, the Trump administration was also handing out the equivalent of pardons to Trump’s favorite corporate criminals.

Deutsche Bank (DB), the only Wall Street bank that still did business with Trump after his casino bankruptcies, agreed to pay a pathetic $125 million fine for bribery violations that extended over a nine year period, ending in 2017. Over those years, DB paid over $7 million in bribes that reportedly made the bank over $35 million, an amount that would be seemingly hardly worth committing the crime for to begin with. According to the NY Times, “Deutsche Bank paid consultants ‘where no invoices were submitted and where invoices contained insufficient documentation to detail what services were performed’. Others were paid in excess of what their contracts called for, or were paid even though they had no contract at the time”. This settlement follows another paltry $16 million settlement with the SEC in 2019 for bribing foreign officials in China and Russia by hiring their relatives.

The bribes were paid to win business in Saudi Arabia, Italy, and China, seemingly indicating that this was not just one DB salesman or office but a more widespread problem. Further supporting that view is the fact that DB had already identified the bribery problem through the use of “consultants” back in 2009 when it was just beginning but apparently did nothing to restrain the practice. Instead, as the Times notes, “Paying bribes to foreign officials and politically connected officials appears to have been standard practice within some corners of the bank”.

The current settlement also resolves claims that DB traders had engaged in pretty brazen market manipulation. Traders would enter fictional orders that they would cancel before the trade could be completed, a process known as “spoofing”, in order to deceive other market participants into actually trading on that false information and allowing the original DB traders to then make a profit.

In addition, the settlement agreement also contains the typical deferred prosecution agreement, allowing the criminal charges against the bank to be wiped away if the bank does not violate the terms of the agreement. But at this point offering DB a deferred prosecution agreement is like releasing a serial thief based on a promise that he’ll only stop holding up bodegas. The list of DB’s prior serious crimes is a rap sheet longer than most hardened criminals. DB paid nearly $9 billion in fines for its involvement in the subprime mortgage fraud associated with the 2008 financial crisis. It helped launder nearly $10 billion for dirty Russian oligarchs using the easily detectable scheme of back-to-back trades that the bank’s compliance department was well aware of. For that crime, DB paid a $600 million fine. DB was part of an industry-wide scheme of interest rate manipulation for which it paid over $3 billion in fines. DB paid an over $250 million fine for its violations of the embargo against Iran. As the correspondent clearing bank for Danske Bank, DB’s compliance department completely missed, or willfully ignored, the massive money-laundering operation Danske was running. Finally, not only did DB have Trump as a client but they also brought on Jeffrey Epstein as a client in 2013, again ignoring suspicious transfers to and from the accounts of both men even when alerted to such transactions by their own employees.

Now that Trump has lost the election, DB is trying to flee from him as fast as possible and hope that everyone forgets just how much the bank has enabled Trump. When Trump defaulted on $640 million in loans, $40 million of which was a personal guarantee to the real estate division of DB in 2008, the bank’s own wealth management division stepped in to loan Trump even more money in order to pay off the loan to the real estate division, an unusual move for any bank to say the least. The wealth management loans were arranged by Rosemary Vrablic, Trump’s personal banker at DB, and her colleague Dominic Scalzi. Those two are apparently the targets of an internal investigation by DB about a real estate transaction that involved a company owned by Jared Kushner. In late December, Vrablic and Scalzi both resigned from DB and last week DB said it would no longer do business with Trump, despite the fact that he still owes the bank over $300 million.

Bur perhaps the most amazing thing is that, despite the bank’s rap sheet as long as your arm, only two DB employees have been charged criminally in relation to the crimes listed above. Both of those were simply traders who were involved in the interest rate manipulation scheme. As usual, management, which was clearly well aware of most, if not all, of these violations as they were occurring, has been largely untouched, allowed to move on as if nothing has happened. The rather unique result is a serially recidivist criminal organization that apparently contains virtually no actual criminals at all. The Mob would be so envious.

Originally published at https://thesoundings.com on January 18, 2021.

Thoughtful discussions on politics and economics with some sidelights in photography and astronomy.

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