According to the SEC, Deutsche Bank violated the books-and-records and internal accounting controls provisions of the FCPA when its Asia-Pacific region’s offices engaged in efforts to hire relatives of potential clients to gain their business. The potential clients were largely state-owned entities with employees who are considered “foreign officials” by the FCPA and Deutsche Bank’s own Global Anti-Corruption Policy.
According the SEC, Deutsche Bank utilized a client referral hiring program in which the bank would hire client referrals—oftentimes family members of clients—with the aim of “generat[ing] business” for the bank. The bank allegedly did so in the Asia-Pacific region and in Russia. Those that were hired through this process “bypassed [the bank’s] highly competitive and merit-based hiring process” and many of whom “were less qualitied than those” that were hired through the typical process. In providing referral hires an advantage in the hiring process, the SEC alleged that Deutsche Bank hoped to gain favor with clients and potential clients who were foreign government officials.
Further, according to the SEC, Deutsche Bank failed to implement a system to ensure it complied with its internal policy prohibiting the hiring of referral candidates affiliated with clients. Deutsche Bank also allegedly failed to ring-fence those it hired through this process from deals in which those hires’ family members were “key decision maker[s]” hoping to capitalize on their relationship.
Even after implementing a hiring policy in 2010 for the Asia-Pacific region disallowing referral hires from clients or potential clients, the SEC claims that certain senior Deutsche Bank employees failed to adhere to the policy. In one instance, the allegedly bank hired a “prohibited candidate” through its joint venture who had previously been rejected as a “high FCPA” risk given that the bank had “pending business” with the state-owned entity with which the hire was affiliated. This hire was made at the request of a state-owned-entity client’s chairman who was the father of the hire. Despite the hire’s alleged lack of qualifications and poor interview performance, Deutsche Bank’s JV hired her and took steps to ensure her position on the transaction with her father’s entity. Additionally, to appear compliant with the internal policy, the SEC alleges that Deutsche Bank employees in this region fabricated information to obscure similarly unqualified hires who were affiliated with or referred by state owned clients or potential clients. Similarly, other unqualified referrals were hired at the request of chairmen and chairwomen of state-owned companies and government officials.