Tax probe places Deutsche Bank’s ethics in spotlight
As Germany’s biggest lender, Deutsche Bank has for many people long symbolised everything that is wrong and immoral about the banking sector and its perceived culture of limitless greed.
However, under the new dual leadership of Anshu Jain and Juergen Fitschen, who took over in June, the bank has been making every effort to clean up that image.
It spent years and many millions of euros transforming its twin tower headquarters into an environmentally-friendly, zero-emission building.
And Jain and Fitschen pledged to nurture a new corporate culture based on responsibility and accountability.
But Deutsche Bank’s squeaky clean new image was looking distinctly tarnished again when dozens of police vans encircled the sparkling new “green” skyscrapers in the early hours of Wednesday and hundreds of investigators stormed the building in search of evidence of widespread tax fraud.
Particularly embarrassing was the announcement that Fitschen himself was under suspicion of being privy to a scheme to avoid paying sales tax in the trading of carbon emissions certificates.
Fitschen, 64, went on the offensive to proclaim his innocence in a number of newspaper interviews on Friday.
“I’m shattered over the accusations against me. I firmly believe they will prove to be groundless,” Fitschen told the mass-circulation daily Bild.
“I feel I am being unjustly treated and will defend myself,” he said.
Asked whether he would resign over the allegations, Fitschen said: “I see no reason to.”
He made similar remarks in a different interview published in the business daily Handelsblatt.
The allegations date back to early 2010 and both Fitschen -- a member of the management board since 2009 -- and finance chief Stefan Krause are under investigation because they signed off the bank’s 2009 valued-added tax (VAT) declaration.
Fitschen told newspapers that he felt the prosecutors’ reaction was ”totally exaggerated”.
“As soon as we realised that we’d been duped by fraudulent clients, we corrected the tax declaration. At no point was any tax money unlawfully paid to Deutsche Bank,” he said.
Prosecutors said a total 25 Deutsche Bank employees are being investigated and four people were arrested on suspicion of money laundering and perverting the course of justice.
Fitschen’s co-CEO, Jain, suffered a dent to his reputation earlier in the year.
Back in July when the Libor interest-rate rigging scandal sent shockwaves through the financial world, he found himself facing uncomfortable questions about his role in the affair.
Prior to his appointment as Deutsche Bank co-head, Jain headed the group’s investment banking operations in London where one of its traders was allegedly involved in the rigging of the Libor interbank rate which underpins rates on a wide range of lending from mortgages to credit cards.
“This can’t go on. Every time there’s a financial scandal, Deutsche Bank is involved. Management has to act urgently,” said Juergen Kurz, spokesman for a lobby group for small shareholders, DSW.
While the bank’s response in all these affairs has been that it will ”cooperate fully with the authorities,” it remains to be seen whether Deutsche Bank is really serious about becoming more ethical.
The announcement in October that it is setting up an independent committee to monitor and improve the transparency of its executive bonus system will, on its own, certainly not be enough to convince its critics.
In fact, last week was a pretty bad week for Deutsche Bank overall.
On Friday, a German court ordered it to pay damages to the heirs of late media mogul Leo Kirch in a long-running legal battle over the collapse of his corporate empire.
The regional appeals court in the southern city of Munich said Deutsche Bank must pay still-to-be-determined compensation after its former chief, Rolf Breuer, openly questioned Kirch’s creditworthiness in a television interview in 2002.
It ruled out any possible appeal by the bank.
Kirch, who died in 2011, insisted that Breuer’s comments led to the collapse of his once powerful media empire and sued the bank for compensation.
On Friday, Deutsche Bank shares were again the biggest losers on the Frankfurt stock exchange, shedding 2.5 per cent.