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Deutsche Bank Whistle-Blower Spurns $8M SEC Reward (bloomberg.com)
198 points by denzil_correa on Aug 19, 2016 | hide | past | web | favorite | 45 comments

Here is the whistle-blower's opinion piece on FT- http://www.ft.com/cms/s/0/b43d2d96-652a-11e6-8310-ecf0bddad2...

Although I need the money now more than ever, I will not join the looting of the very people I was hired to protect. I never intended to turn a job in risk management into a crusade, but after suffering at the hands of the Deutsche executives I will not join them simply because I cannot beat them.

I request that my share of the award be given to Deutsche and its stakeholders, and the award money clawed back from the bonuses paid to the Deutsche executives, especially the former top SEC attorneys.

I would then be happy to collect any award for which I am eligible.

Basically he seems to be saying that when the SEC impose a fine on thieves, they are just meta-thieves: thieves robbing thieves, who effectively participating in the original looting by proxy, rather than helping.

I took it differently. If the fine was coming from the executives paychecks he wouldn't be opposed to it. But as it stands the fine is coming from the shareholder's pockets who have already been stolen from. So all he would be doing is becoming a thief in addition to the executives.

Yes; that's what I mean. First move the stolen goods back to the victims from the robbers. Then apply any additional penalty.

> Although I need the money now more than ever, I will not join the looting of the very people I was hired to protect.

I'm impressed by this man's character. Not many people would give up $8 million to which they are legally entitled.

Im sure a lot of shareholders are too now

Meh, in the scheme of things this nets out to very little for Deutsche shareholders. It's truly a moral stance.

Huge respect for this guy. How much better would the world be if 30% of the population could take this level of ethics to life. Some reputable bank should chase this guy to work in their regulatory affairs.

> Some reputable bank should chase this guy to work in their regulatory affairs.

I doubt he will ever find a job in this field again.

If you show such 'disloyalty' towards your employer you will be tainted forever. Companies, especially banks, do not want to run the risk of having their dirty laundry exposed (both legal and illegal dirty laundry). If there is any hint that you cannot look away when questionable things are happening there is no chance you will get hired.

The Financial Times has an article about three Wallstreet whistleblowers (including the Deutsche guy): http://www.ft.com/cms/s/2/ce216134-e6c7-11e3-9a20-00144feabd...

Is there such a thing as a "reputable bank" though? There are huge profits to be made by skating close to, and over, the ethical line. I doubt banks really want comply - they just want to avoid getting caught.

Perhaps smaller banks that cannot afford to eat millions of dollars/pounds of fines from the SEC or FCA?

Assuming they're as sinister as you think (not sure if this is true) he won't get hired at Goldman, JPM or similar, but I know that Risk/Compliance dept at company I work for would jump at the chance to hire someone so knowledgable and ethical as this guy if they had open positions.

I would guess at least half goes to his ex-wife, and a pretty significant portion of the rest goes to his lawyers. Which suggests he may not be getting a life-changing amount out of it in the end, and so would be more incentivized to publically spurn the award.

Wealthy people benefit at every step of the legal process. If the sec did this, had bonuses being used to pay fines, people would buy insurance against it, and the insurers would pay it if and when it happened. Maybe that would be helpful as insurers would want to do due diligence.

But I'm not at all sure that's a solution.

Most insurance policies have quite a few clauses under which the insurance won't be paid out fully or at all.

For example you can't take out an insurance policy on your house and set it on fire and claim the insurance afterwards.

Life insurance policies usually have an "under suspicious circumstances" or "self inflicted death" clauses that restrict the payout of the policy as well as the usual "in good faith clause" so if you have a life threatening condition and you hid it from the insurer you can kiss your policy goodbye.

Insurance policies that provide coverage in case of loss of work exist but those are limited to conditions in which you lost your work due to a health issue, got fired etc. and you usually have to meet pretty strict conditions to get any payout from the policy.

A CEO can most likely find some insurance company to cover their compensation package but you'll be your ass there will be a "fraud" or "gross incompetence" clause in it that would prevent them seeing a penny.

In general this is called adverse selection, and to the extent that the insured can affect the probability of the loss, the risk is not insurable so these clauses are existentially necessary for the insurer [1].

[1]: https://en.wikipedia.org/wiki/Insurable_risk

Hmm... but they never admit wrong-doing, fraud or anything they just pay to settle. And the pay out would only be if the SEC or other government body actually went after them. I'm reasonably sure there would be a way, and even if it was a bad bad investment for the insurer to take directly, it could be wrapped in derivatives and chopped up and sold to institutional investors. But perhaps I'm just cynical.

  > He said his ex-wife and his lawyers had claims to a 
  > “portion” of the money, without being more specific.
I imagine his lawyers (and ex-wife?) will be a little annoyed.

No, they get to keep their portion.

If he doesn't get paid, there is no portion.

This is incorrect.

most interesting is that he compares deutsche to a smaller firm that committed similar crimes (Trinity Capital). There executives are held liable and fined. At deutsche, where SEC senior lawyers and deutsche senior lawyers have revolving doors, find the company not the execs.

that (which would help prevent moral hazard) seems to be his redline

Where is the Netflix documentary that goes deeper into this pattern

how about John Oliver

I don't know which is more incredible, the fact that the SEC wants to give someone 8 million dollars for doing their job and having a sense of morality or that we live in a society where doing one's job is and being moral is newsworthy.

Where does all the money that SEC collects in fine go? Nobody seems to know. It doesn't seem to go to anything that benefits the society that is regularly victimized by these white collar criminals. It doesn't go to an education fund for underprivileged people or donated to disease research. It just seem to go into to some discretionary slush fund that the SEC controls the purse strings on. Case in point, an 8 million dollar reward for doing the right thing. They dole out hundreds billion of dollars in fines a year. The dollar size of the individual settlements no longer phases the causal reader.

The SEC seems like another part of this crooked banking machinery. Only in the United States can you pay a fine of 10s of millions of dollars and not have to admit wrong dong. Talk about theater. The fact that they were maybe going to start requiring admission of wrong doing in certain was itself a news item:


In 2014 the SEC collected over 4 billion dollars in fines! http://wealthmanagement.com/industry/sec-collects-record-41-...

I would love to buy this guy a beer. I also think he would accept and appreciate it.

SEC fines go to the US Treasury. DOJ fines may go to Treasury, into a general victims fund, or gets offset against DOJ's budget.

Yes that much is known. Then what happens to that money once it's added to the Treasury's balance sheet? How is allocated or apportioned? We are talking about billions of dollars a year. Nobody knows. Its a black box.

It's not allocated or apportioned. It goes into the Treasury's general find. So it goes to paying all of the things the government pays for: Medicare, social security, and war.

No, taxes fund those.

The US government spends more than it brings in with taxes. Fines deposited into the treasury general fund make up part of that difference.

Why not use the money to fund a lawsuit to get the results he wants?

He was whistleblowing on Deustche bank taking advantage of their shareholders, and in turn is being paid out of a fine that they had to pay (which, of course, comes from the shareholders themselves not the accused execs) so it's a bit of a perverse incentive for him. The rest of us can stand jaw-dropped at turning down a massive sum of money, but bravo to him for pointing this out with his (seemingly selfless) action here.

Maybe his comment “I will not join the looting of the very people I was hired to protect.” explains that.

Right, but didn't the bank still have to pay the money?

If the bank didn't have to pay the fine, the money would have went to the shareholders. But it was the shareholders who were being defrauded in the first place that made the guy become a whistle blower.

The crooked executives got their bonuses and didn't have to pay a fine.

Part of me thinks that this guy is a hero but my cynical side thinks that maybe he can get more out of the situation in the long term (in terms of reputation and future clients/contracts) by turning down the money (given that this news has worldwide coverage).

Regardless of the motivation though; I think this move is good for society and sends the right message.

8M is some serious cash, and this story will be forgotten next week. There's no need to put down people taking moral decisions. Cynicism is exactly the thing perpetuating problems like this, resist that in yourself.

Unfortunately, cynicism works. The cynical view is almost always the correct view. Every small success I've had in my life was won through the power of cynicism.

For any event, if I have two possible explanations to choose from:

a) A simple, pure, altruistic explanation


b) A complex, contrived 'evil' explanation

I believe 'b' by default; unless there is sufficient proof to show otherwise. It needs to be reasonable proof, not consensus - Consensus means nothing; just look at all the different religions that exist - We know for sure that at least some of them must be wrong even though they have millions or billions of followers.

I agree 100% though that it's a shame that the media doesn't do more write ups on these kinds of events - Reading the article, I also have the gut feeling that this is the kind of news which will be forgotten tomorrow.

This is terrible when you consider that this article is actually pretty interesting/noteworthy in itself but also because it could lead to a lot of even more interesting articles (which will probably never be published unfortunately).

Even lottery winners get better news coverage than this.

Cynicism works, but not for the bearer. Cynical people are easy to manipulate, their smug worldview notwithstanding.

"Cynicism masquerades as wisdom, but it is the farthest thing from it. Because cynics don’t learn anything. Because cynicism is a self-imposed blindness, a rejection of the world because we are afraid it will hurt us or disappoint us." - Stephen Colbert

You keep using that word. . . .

Cynicism has nothing to do with complexity or evil or contrivance.

It's the belief that people are fundamentally motivated by self-interest. That's ethically neutral, at worst (best?). And it's also demonstrably false if you pay any attention to economics.

It's not really easy to tell what does actually motivate people, but self-interest isn't it.

Who's losses where they hiding? I have a few theories of whose trading counted for most of these losses.

These were paper / model-based losses, i.e., they were for derivatives whose value dropped during the financial crisis, but whose value went back up after the crisis. Because they were illiquid and not traded during the crisis, these losses were never actually realized. See http://dealbreaker.com/2012/12/deutsche-bank-ignored-some-lo...

> these losses were never actually realized

a good portion of them were, but were further covered up by gains made by "fixing" Libor in 2008/9.

Tangential: why use a rare (and dying![0]) word for turns down ? I had to look up whether he was unhappy about it, disapproving of it, or turned it down.

[0]: https://books.google.com/ngrams/graph?content=spurn&year_sta...

spurn is not a rare word. even according to your link its use has held since pretty much the 1980s.

I saw someone use the phrase "spurned into action" the other day, which may be an autocorrect fail but if not it was a clever usage of the word.

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