Friday, 14 December 2012

Deutsche Bank’s $12 Billion in Hidden Losses: Why Whistleblower Charges Have Merit and Why They Matter « naked capitalism

I’ve read the Department of Labor complaint of former Deutsche Bank employee Eric Ben-Artzi that, among other things, alleges that the German bank violated SEC, GAAP and IFRS (International Financial Reporting Standards) requirements and probably also Sarbanes Oxley, and have had follow up conversations with him and his counsel. The charges are specific and sufficiently well supported to merit serious investigation. In their efforts to dismiss his charges, defenders of the bank’s position overlook the public reporting requirements for complex financial transactions like the one in question, a leveraged super senior (LSS) trade. Nor does their Panglossian “everything worked out for the best” argument stand up to scrutiny.

Deutsche’s CFO issued a statement on Thursday justifying the bank’s actions; we’ll address that after providing some context.

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