Deutsche settles hiring probe
DEUTSCHE BANK has agreed to pay more
than US$16m to settle a US probe into its
hiring practices in Asia and Russia, the US
Securities and Exchange Commission said
last Thursday.
The regulator said that between at least
2006 and 2014, the German investment
BANKûHADûHIREDûPOORLYûQUALIlEDûRELATIVESû
OFûFOREIGNûOFlCIALSûINûORDERûTOûWINûLUCRATIVEû
business mandates, in violation of anti-
corruption laws.
“From the outset, the primary goal of
referral hiring was to generate business
for Deutsche Bank by extending personal
favors to clients, including government
OFlCIALS ûTHROUGHûHIRINGûTHEIRûRELATIVES vûTHEû
SEC said.
According to the SEC, the bank
generated roughly US$10.8m in income
from transactions that occurred within
the statute of limitations as a result of the
hiring practices.
As part of the settlement, Deutsche
agreed to pay back the US$10.8m plus
INTERESTûOFû53MûANDûAûlNEûOFû53Mû
Under the settlement, Deutsche Bank did
NOTûADMITûORûDENYûTHEûlNDINGS
“Deutsche Bank provided substantial
COOPERATIONûTOûTHEû3%#ûINûITSûINQUIRYûANDû
has implemented numerous remedial
measures to improve the bank’s hiring
PRACTICES vûAûSPOKESPERSONûFORûTHEûBANKû
said.
The SEC’s statement details several
instances where senior employees actedto circumvent the bank’s hiring policies
and compliance safeguards to bring on
board candidates put forward by clients or
prospective clients at Chinese state-owned
enterprises.
In one instance, executives at a large
Chinese SOE asked the bank to hire the
chairman’s daughter. She had minimalWORKûEXPERIENCEûANDûINSUFlCIENTûACADEMICû
credentials. Moreover, headcount
restrictions that were in effect at the time
meant that her application was unlikely to
get past human resources and compliance.
$EUTSCHESûCHAIRMANûOFû!SIAû0ACIlCû
CORPORATEûlNANCEûANDûTHEûLEADûBANKERûFORû
the SOE then instructed Deutsche’s China
securities joint venture to hire her. The
CEO of the JV said she was “an average-level
CANDIDATEvûANDûHADûFAILEDûTWOûCOMPETENCYû
tests but she was hired anyway.
Only a few months after joining,
SHEûTHREATENEDûTOûQUITûIFûSHEûWASûNOTûtransferred to Hong Kong. Due to a global
HIRINGûFREEZE ûWHICHûREQUIREDûGLOBALû
management approval for all new hires,
she was seconded to Hong Kong, while
ways were sought to get around the need
for sign-off from global management.
In another case, a senior executive at an
SOE asked the bank to hire her son. His CV
contained numerous grammatical errors
and typos, which a Deutsche employee
revised. He was also emailed a “cheat
SHEETvûBYûAûBANKERûTHATûINCLUDEDûINTERVIEWû
QUESTIONSûANDûACCEPTABLEûRESPONSES
Despite the coaching, he still performed
poorly. Interview notes said that he was
“one of the worst candidates they ever
INTERVIEWEDvû(EûWASûSTILLûHIREDûBYûTHEûBANKû
and later promoted for bringing in two
deals from the company where his mother
was employed.
The SEC’s statement also describes
similar cases involving relatives of Russian
GOVERNMENTûOFlCIALSû)NûONEûCASE ûAûHUMANû
resources employee said an SOE executive
son’s should be sacked only a few months
after he had started working in London
and described him as “a liability to the
REPUTATIONûOFûTHEûPROGRAM ûIFûNOTûTHEûlRMv
Deutsche is one of several global banks
to have settled charges in the US that it
HIREDûRELATIVESûOFûINmUENTIALûBUSINESSMENû
ANDûGOVERNMENTûOFlCIALSûINûORDERûTOû
WINûBUSINESSû4HEûMOSTûHIGH
PROlLEûCASEû
involved JP Morgan, which in 2016 agreed
to pay US$264m in a settlement with the
SEC, the Department of Justice and the
Federal Reserve.
THOMAS BLOTTPeople
&Markets
CIC in talks over Henfeng rescue
China’s sovereign wealth fund is in talks
ABOUTûACQUIRINGûAûSTAKEûINûHENGFENG BANK,
paving the way for the third state-backed
rescue of a troubled lender since May.
Central Huijin Investment, a subsidiary
of CHINA INVESTMENT CORPORATION, may take a
stake of less than 20%, according to local
media reports.
Hengfeng, one of China’s 12 national
joint-stock commercial banks, has
also received a Rmb30bn (US$4.25bn)
investment by an entity controlled by
the Shandong provincial government,
according to those reports.
The rescue comes after China’s central
bank and its banking and insurance
regulator in May announced that they
WOULDûSEIZEûCONTROLûOFû)NNERû-ONGOLIA
based regional lender Baoshang Bank.4HISûWASû#HINASûlRSTûGOVERNMENTû
takeover of a bank since 2001 when
Shantou Commercial Bank was brought
under Beijing’s control following a
corruption scandal.
Last month, Industrial and Commercial
Bank of China and two of the big four asset
management companies, China Cinda
!SSETû-ANAGEMENTûANDû#HINAû'REATû7ALLû
!SSETû-ANAGEMENT ûALSOûAGREEDûTOûACQUIREû
a combined 21% stake in troubled regional
LENDERû"ANKûOFû*INZHOU
Signs of distress at Hengfeng have been
discernable for several years. It has not
released an annual report for the past two
years. Its former chairman Jiang Xiyun was
CHARGEDûWITHûEMBEZZLINGû2MBMûFROMû
the bank, according to a report last year
FROMû#HINASûOFlCIALû8INHUAûNEWSûAGENCYûHis predecessor, Cai Guohua, was also
investigated for graft, according to Xinhua.
(ENGFENGûWASûONEûOFûFOURûBANKSûmAGGEDû
by UBS analyst Jason Bedford in a 2017
report on the build-up of shadow banking
products that allowed banks to effectively
disguise loans as investments. Bedford also
mAGGEDû"AOSHANGûANDû"ANKûOFû*INZHOUû4HEû
fourth lender, Chengdu Rural Commercial
Bank, has also not released its 2018 annual
report.
Hengfeng, previously referred to as the
aptly named Evergrowing Bank, is far larger
than the other three banks with total assets
of Rmb1.33trn, according to UBS estimates.
This compares with Rmb748.4bn for Bank
OFû*INZHOUûANDû2MBBNûFORû"AOSHANG
Hengfeng Bank declined to comment
when contacted by IFR, while Central
Huijin Investment did not respond to a
REQUESTûFORûCOMMENT
THOMAS BLOTT, YANFEI WANGInterview notes said that he was
“one of the worst candidates
they ever interviewed”. He was
still hired by the bank and later
promoted for bringing in two
deals from the company where
his mother was employed.