Deutsche Bank: The Job Offer and the Consultant’s Invoice

The Deutsche Bank FCPA case covers two Securities and Exchange Commission settlements: more than $16 million over referral hiring in 2019 and more than $43 million over intermediary payments in 2021. In both investigations, the agency alleged that the bank used jobs and paid relationships to win business, while its hiring process and accounting controls failed to stop the arrangements. If you know why someone received an offer or why a consultant got paid, you may recognize the business purpose the paperwork concealed.

The benefit alleged in these Foreign Corrupt Practices Act matters took a different form in each. One reached an official’s relative through employment. The other reached officials, relatives and associates through business development arrangements. Both belong to the world of banking and investment bribery, where the valuable thing a bank wants may be the customer’s decision to give it business.

Referral Hiring Put Banking Business Inside the Recruitment File

Deutsche Bank referral hires allegedly bypassed the bank’s competitive, merit-based hiring process and were often less qualified than ordinary applicants, according to the Securities and Exchange Commission’s August 22, 2019 announcement. The agency alleged that employees hired relatives at foreign officials’ requests in the Asia-Pacific region and Russia to obtain or retain business or other benefits. The settlement concerned the bank’s books and records and internal accounting controls.

Deutsche Bank agreed to return $10,785,900 in gains and pay a $3 million civil penalty. The penalty was smaller than the gains the bank agreed to give back.

The commercial purpose matters as much as the hiring exception. The agency alleged that the bank sought to influence officials in connection with investment banking business. A recruiter could see a candidate being pushed past the usual selection process, while a banker could know what the referring official was expected to deliver. That connection shows how a hiring decision can buy banking business.

We see the absurdity in running a merit-based hiring process with a separate entrance for the people who can bring in business. In the agency’s account, the official’s request could accomplish what the candidate’s qualifications did not. For the employee who saw the request arrive, the reason for making an exception may be more revealing than the job title.

A closely related pattern appears in JPMorgan‘s referral-hiring case. In its order concerning that bank, the Securities and Exchange Commission alleged that employees tracked revenue from clients whose referrals had been hired, while questionnaires concealed the expected business benefit. The order describes how an inconvenient answer could become an acceptable one:

That parallel gives a recruiting or compliance insider something concrete to recognize: the explanation can change while the business expectation stays the same. We would want to understand both the original request and the answer that reached the reviewer. An approved questionnaire can tell a very different story from the conversation that produced it.

Business Development Consultants and Concealed Payments

Deutsche Bank business development consultants allegedly included foreign officials, their relatives and their associates, according to the Securities and Exchange Commission’s January 8, 2021 announcement. The agency described intermediaries, consultants and finders engaged to obtain and retain global business. In the agency’s account, the relationship itself was part of what the bank was buying.

The agency alleged approximately $7 million in bribes or payments for unknown, undocumented or unauthorized services, while the bank agreed to return $35 million in gains to settle the action. The agency attributed the payments to insufficient controls over intermediaries. It also alleged that employees falsified invoices and documentation and recorded those payments as legitimate business expenses. The accounting description supplied a business explanation for money whose actual purpose or authorization was in question.

For an accounts-payable employee, that places the invoice inside the scheme. The issue is the link between the named service, the person receiving the money and the business the bank sought. An invoice can look complete to someone who has never seen the introduction or heard why the relationship mattered.

We read the alleged false entries alongside the bank’s books, records and payment controls. The agency’s account reaches beyond a missing attachment: it describes employees creating false support for payments and recording them as ordinary expenses. The person who knows what work actually happened can explain the difference between the service on the invoice and the reason for the transfer.

The Banking Records That Connect the Request to the Payment

A banking mandate shows the business the bank was engaged to do, and a consultant’s engagement shows the services the bank says it is buying. Looking at them together can reveal why a relationship was valuable, especially where the person receiving a fee is connected to the official controlling the customer’s decision.

The commercial roles leave different records: mandates and fees on the banking side, engagement reasons and qualifications on the intermediary side, transfers and accounting entries in finance. Connecting those records is how we examine the business purpose behind an apparently ordinary payment.

Ownership can explain another part of the transaction. The consultant named on a contract, the person who ultimately benefits and the official who can influence a decision may occupy different positions in the same arrangement. An insider’s knowledge of the relationship can explain why a payment went to that recipient, rather than leaving the investigation with an invoice and an account name.

A 2022 article in the Journal of Forensic and Investigative Accounting, How to Avoid Inadvertently Violating the Foreign Corrupt Business Practices Act Abroad, identifies unusual credit terms and unusual payment installments to holding organizations as signals that transaction reviews can uncover. For someone in finance, the payment terms may expose a question that the service description never answers.

We apply that transaction-level view to the two benefits in Deutsche Bank’s cases. In hiring, the connection runs from the request and the exception to the business the official could influence. In the intermediary matter, it runs from the relationship and claimed service to the approval, payment and recorded expense. Your view of one of those decisions can give the surrounding documents their meaning.

When Approval Papers Hide the Relationship

The Goldman Sachs case shows why an approval file must be read alongside what bankers knew about the intermediary. In its order concerning Goldman Sachs, the Securities and Exchange Commission alleged that compliance and intelligence personnel rejected a client relationship over concerns about the source of an intermediary’s wealth. Senior employees nevertheless continued working with him because they believed he could help deliver lucrative business through government officials. The agency also alleged that a senior banker falsely denied the intermediary’s involvement when an approval committee asked directly about it.

For Deutsche Bank’s intermediary allegations, the comparable question is who understood the relationship behind the expense. A finance reviewer may know what support was required, a business sponsor may know what the consultant was expected to accomplish, and a colleague may know what work occurred. We connect those perspectives to the transaction, including what the intermediary review actually examined.

What an Insider Can Add

A recruiter who remembers the pressure behind a hire and a finance employee who knows the service behind a payment hold different pieces of the banking story. The evidence that connects a decision, payment and false record can come from that ordinary working knowledge. We work with you to explain what the documents meant inside the business and which decisions they reflect.

Whistleblowers can receive 10% to 30% of the money collected in SEC enforcement actions through the SEC whistleblower award program. A whistleblower case under the separate False Claims Act can pay 15% to 30% of what the government recovers. For the foreign-bribery information at issue here, we build your strongest SEC whistleblower case around the transactions you know.

You Know Why the Bank Wanted the Relationship

If you saw a hire pushed through for a client’s benefit or an invoice used to disguise the purpose of a payment, speak to our whistleblower experts about what happened inside the bank. We build the case around your knowledge of the banking relationship, bring in FCPA whistleblower lawyers who understand financial institutions, and stay beside you as the matter develops.