Bank ‘vicariously liable’ for bribes

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Bank ‘vicariously liable’ for bribes


Frankfurt-headquartered Deutsche Bank says it strongly denies the allegations. Photo: Bloomberg
Frankfurt-headquartered Deutsche Bank says it strongly denies the allegations. Photo: Bloomberg

Stichting Vestia, a Dutch affordable-housing provider that nearly collapsed as a result of derivatives losses, is suing Deutsche Bank, saying the bank is responsible for bribery.

The bank paid €3.5m in commissions to a Dutch company, First in Finance Alternatives, Vestia alleges. About €1.75m of that went to Vestia’s treasury and control manager Marcel de Vries, who single-handedly conducted Vestia’s derivatives trading, the housing group said.

The bank may have paid commissions to First in Finance Alternatives at De Vries’ personal request, Vestia said in court filings for a hearing in London yesterday, where it accuses the bank of “wining and dining and entertaining him to an excessive degree”. De Vries and Arjan Greeven, an intermediary who traded under First in Finance’s name, were convicted of bribery in the Netherlands last year.

The bank either knew or suspected De Vries was benefiting from fees paid to First in Finance, and “dishonestly continued to pay commission nonetheless,” Vestia said. In any case, the bank used First in Finance as an agent to encourage transactions involving the housing group, so is “vicariously liable” for bribes paid by First in Finance, Vestia said.

No one at Deutsche Bank knew about the bribery, it said in its filings. It said the lawsuit is a “strained and unsustainable attempt” by Vestia “to recover the losses on its derivatives by any means, including by creating a fallacious link between those losses and the separate matter of First in Finance’s bribery of Mr De Vries”.

The bank said the allegations are “without basis” and it denies them in “the strongest terms”.

Vestia lost more than €2bn on derivatives trades, of which “a substantial part” came from trading with Deutsche, it said in its filings. The lawsuit aims to recoup some of that money on the grounds that the bribes meant some transactions were flawed. It’s seeking €840m in damages. Commissions paid to First in Finance “were being priced in by Deutsche Bank and paid at Vestia’s expense,” the housing group said. Vestia’s bribery case stems from its discovery that De Vries was taking a share of the fees that Greeven received from various banks.

Greeven “confessed his wrongdoing to the Dutch authorities in March 2012,” and in July 2018, he and De Vries were convicted of bribery in the Netherlands, the document said. They are appealing in the case.

Deutsche said it “knew nothing about Mr Greeven’s secret arrangements with Mr De Vries”. Vestia has already tried to persuade Dutch authorities to prosecute Deutsche Bank staff over the allegations, it said, but there haven’t been any charges or prosecution.

The scale of the derivatives trading between Deutsche and Vestia was “colossal”, with the notional principal peaking at €3bn in 2011, Vestia said.

Deutsche Bank took De Vries to Michelin-starred restaurants and to Boujis, an exclusive London nightclub, where a group drank Dom Perignon champagne, according to filings. That club is popular with younger members of the British royal family, “some of whom have made the transition to responsible parenthood,” Vestia’s lawyer Rhodri Davies said in court.

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After the nightclub trip, De Vries entered into new Deutsche Bank trades, Vestia said.

“A tenant of Vestia, or a Dutch taxpayer, could reasonably question whether Mr De Vries was motivated solely by the best interests of Vestia when he traded with Deutsche Bank while being entertained by them at a cricket match or shortly after dinner and a night out at Boujis,” Vestia said.

Bloomberg