Corporate annual meetings and the publication of company annual reports usually come off like clockwork. Deutsche Bank, however, has found itself in the awkward position of having to call an extraordinary general meeting and delay the issuance of its annual financial documents until after that event.
These unusual measures are symptoms of the disarray of the giant German financial institution as it copes with a series of legal complications stemming from its own ethical shortcomings.
The special meeting was necessitated by a court ruling that invalidated votes that had been taken at last year’s scheduled shareholder gathering. That ruling came as the result of a legal challenge brought by the heirs of German media tycoon Leo Kirch, who blame the bank for forcing his company into bankruptcy.
There’s a silver lining in this for Deutsche Bank management, since the delay in the publication of the annual report (and the 20-F filing with the U.S. Securities and Exchange Commission) means that it will have more time before it needs to give more details about the various legal messes it is in.
It’s not easy keeping track of them all. Deutsche Bank’s reputation has been tarnished in a variety of ways. This is not to say that the bank’s image started off spotless. It did, after all, actively collaborate with the Nazi regime, helping appropriate the assets of financial institutions in conquered countries.
The sins were not all in the distant past. In 1999 Deutsche Bank acquired New York-based Bankers Trust, which was embroiled in a scandal over its diversion of unclaimed customer assets into its own accounts; it had to pay a $60 million fine and plead guilty to criminal charges.
Deutsche Bank itself was then the subject of wide-ranging investigations of its role in helping wealthy customers, especially those from the U.S., engage in tax evasion. The bank was featured in an investigative report on offshore tax abuses issued by a U.S. Senate committee and was eventually charged by federal prosecutors. In 2010 it had to pay $553 million and admit to criminal wrongdoing to resolve allegations that it participated in transactions that promoted fraudulent tax shelters and generated billions of dollars in U.S. tax losses.
That did not put an end to Deutsche Bank’s tax evasion woes. It is currently reported to be the subject of an investigation by German prosecutors of tax dodging through the use of carbon credits. In December, the bank’s German offices were raided by some 500 police officers seeking evidence for the probe.
Deutsche Bank is also widely reported to be under investigation for its role in the manipulation of the LIBOR interest rate index. There has been speculation that the bank’s co-chief executive, Anshu Jain, might lose his job over the issue. Lower-level employees of the bank have already been disciplined.
There’s more. Deutsche Bank is one of the firms that were sued by the U.S. Federal Housing Finance Agency for abuses in the sale of mortgage-backed securities to Fannie Mae and Freddie Mac (the case is pending). Last year, the U.S. Attorney for the Southern District of New York announced that Deutsche Bank would pay $202 million to settle charges that its MortgageIT unit had repeatedly made false certifications to the U.S. Federal Housing Administration about the quality of mortgages to qualify them for FHA insurance coverage.
In January Deutsche Bank agreed to pay a $1.5 million fine to the U.S. Federal Energy Regulatory Commission to settle charges that it had manipulated energy markets in California in 2010.
Deutsche Bank’s misconduct goes beyond the realm of finance. The bank is being targeted by labor activists in Las Vegas, where it owns two casinos. Members of UNITE HERE have been picketing the bank’s Cosmopolitan casino over management’s insistence on weakening standard industry work rules during negotiations on the union’s first contract at the site. As part of its organizing drive, UNITE HERE created a website called Deutsche Bank Risk Alert to highlight the negative issues surrounding the casino’s parent. It has not lacked for content.
Note: This piece draws from my new Corporate Rap Sheet on Deutsche Bank, which can be found here.