Deutsche Bank to Pay $6 Million to Former Executive in Dispute Over Trades
2018年5月3日 - 4:31AM
Dow Jones News
By Jenny Strasburg
Deutsche Bank AG agreed to pay former executive Colin Fan
roughly $6 million to settle a lawsuit he filed over trades that
bank lawyers concluded improperly earned him millions of dollars,
according to people familiar with the settlement.
The agreement is a partial victory for Mr. Fan, who argued that
Deutsche Bank unfairly withheld bonuses he had earned while he
worked there. He left the bank in late 2015.
The trades in question, first reported by The Wall Street
Journal in 2016, started in 2009. They were designed to remove risk
Deutsche Bank had taken when it made a deal to invest roughly $750
million on behalf of an insurance-company client, the Journal
reported, citing people familiar with the transactions.
Members of Mr. Fan's team helped arrange the series of
derivative trades, in partnership with a small Monaco-based hedge
fund. The trades inherently carried little risk of loss but
produced price swings Deutsche Bank didn't want on its books.
Mr. Fan, who in 2009 was Deutsche Bank's global head of credit
trading, and five other bank employees put their own money into a
structure to offset the price-fluctuation risks. Deutsche Bank lent
the investors roughly $30 for every $1 invested, amplifying the
trades' steady returns over a period ending in 2017. Most of the
profits came in the first two years.
Internal bank auditors concluded that Mr. Fan received about $9
million on a roughly $1 million personal investment, the Journal
reported. The bank's investigation found Mr. Fan had violated bank
policies and codes of conduct, and the bank in late 2016 froze
scheduled share allocations he had received in deferred bonuses
before he left Deutsche Bank. Last year, Mr. Fan sued Deutsche
Bank, seeking at least $13 million for unpaid compensation and
legal costs.
The legal battle between Mr. Fan and Deutsche Bank centered in
part on a 2009 compliance review of the trading structure, people
briefed on it said. Mr. Fan argued that he and his team had
disclosed plans adequately and that the bank signed off, though
some of the bank's lawyers and managers argued the structure
improperly paid an inflated share of profits and fees to the
employees and the hedge fund while locking Deutsche Bank into fixed
costs it could have avoided with proper disclosure.
A spokesman for Mr. Fan told the Journal in 2016 that he had
"fulfilled all appropriate compliance procedures, been entirely
transparent at all times, and denied any wrongdoing." At that time,
Deutsche Bank was still conducting its internal investigation. U.K.
regulators investigated the trades and related disclosures, and in
2016 declined to pursue any action against Mr. Fan, according to
the bank the spokesman.
Mr. Fan by then had left Deutsche Bank in a 2015 management
reshuffle under a new chief executive, John Cryan, who looked dimly
on the trades. He told colleagues the trades crossed the lines of
appropriateness for "personal account" investments by employees,
people involved in the discussions said.
Mr. Cryan was dismissed as CEO last month, replaced by longtime
executive Christian Sewing. Meanwhile, management board members
over the past year were split over whether to continue fighting Mr.
Fan's lawsuit or settle, in part to avoid further legal costs,
people close to the bank say.
Both sides agreed not to disclose terms of the lawsuit's
settlement, one person said. A Deutsche Bank spokeswoman declined
to comment. Mr. Fan did not respond to requests for comment.
Mr. Fan last year joined SoftBank Group Corp. and is a managing
partner with SoftBank Investment Advisers, which oversees the $93
billion Vision Fund. He's based in California.
Banks have compliance rules aimed at policing employees'
personal trading to avoid conflicts that could hurt clients or
shareholders. Mr. Fan and others involved in the Deutsche Bank
trades told current and former colleagues that transactions deemed
unacceptable now were once more commonplace, arguing that different
rules applied in 2009.
Write to Jenny Strasburg at jenny.strasburg@wsj.com
(END) Dow Jones Newswires
May 02, 2018 15:16 ET (19:16 GMT)
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