In context

Remarkable whistleblower rejection of USD 8.25 million award

September 13, 2016
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In context

In August 2016, a former risk officer wrote an opinion piece published by the Financial Times explaining his reason for allegedly rejecting a whistleblower award of USD 8.25 million (half of the 16.5 million total). According to the opinion article, the former risk officer felt that the Security Exchange Commission did not do enough to punish the executives responsible for the bank’s wrongdoing.

On 26 May 2015, the SEC imposed a USD 55 million fine on Deutsche Bank. According to the SEC, the bank had overvalued certain trades in credit derivatives. This allegedly resulted in misstatements in the bank’s financial statements.

 

A former risk officer of the bank went to the SEC to sound the alarm over the alleged wrongdoing. According to the opinion article, the SEC awarded the whistleblower USD 8.25 million from a total USD 16.5 million whistleblowing award. Taking into account the second-largest award of more than USD 22 million announced on 30 August 2016, SEC awards to whistleblowers have now exceeded USD 100 million.

 

The whistleblower, a former risk officer at Deutsche Bank, rejected the award. In the opinion article, he explained why, emphasising that the bank – in particular, its shareholders and employees is the victim of the alleged wrongdoing and should therefore not be punished. He further protests that it is “especially disappointing that in 2015, after a lengthy investigation helped by multiple whistleblowers, the SEC imposed a fine on Deutsche’s shareholders instead of the managers responsible.”

 

The whistleblower’s refusal is in line with a wider call for individual accountability, which is becoming a focal point of attention in corporate enforcement, especially in the US. According to the U.S. Department of Justice, the rationale behind this focus is that “it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.”(Yates Memo; see In Context 14 October 2015).

 

The focus on individuals in corporate enforcement matters is not only an American development. The same can be seen in the Netherlands. We will keep a close eye on further developments and keep you informed.

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