Whistleblower: a cozy relationship between Deutsche Bank and SEC

Deutsche Bank whistleblower rejects award because SEC 'went easy' on execs

Eric Ben-Artzi, a former risk officer, told the agency to give his share of $16.5m award to Deutsche and its shareholders after ‘disappointing’ investigation of bank

Ben-Artzi blamed the result of the SEC’s investigation on what he says is a cozy relationship between Deutsche Bank and the regulatory body. Photograph: Luke Macgregor/Reuters

Jana Kasperkevic in New York

Thursday 18 August 2016 22.34 BST

A Deutsche Bank whistleblower has turned down his share of the $16.5m whistleblower award, stating that the Security Exchange Commission (SEC) did not do enough to punish the executives responsible for the bank’s wrongdoing.
Eric Ben-Artzi, a former risk officer, went to the regulators after he was fired by Deutsche Bank for raising alarm over the bank’s inflated valuation of its portfolio of credit derivatives. According to him, by imposing a $55m fine on the bank but letting the executives off scot-free, the SEC has instead punished the bank’s “rank-and-file” employees and shareholders.

Are financial whistleblowers worth it? Study says yes – to the tune of $21.27bn

“I request that my share of the award be given to Deutsche and its stakeholders,” he wrote on Thursday in an opinion piece published by the Financial Times. (Ben-Artzi was eligible to receive $8.25m, according to the FT.) He noted that financial award was a “powerful incentive” when he first decided to help SEC and that he is not “at liberty to reject” the award since portion of it belongs to his lawyers and his ex-wife.
Ben-Artzi said that the result of SEC’s lengthy investigation was “disappointing” and that “top executives retired with multimillion-dollar bonuses based on the misrepresentation of the bank’s balance sheet”.
The reason why Deutsche Bank was only subject to a $55m fine is that its top lawyers have long been “revolved” in and out of the SEC, according to Ben-Artzi.
“Robert Rice, the chief lawyer in charge of the internal investigation at Deutsche in 2011, became the SEC’s chief counsel in 2013,” he wrote. “Robert Khuzami, Deutsche’s top lawyer in North America, became head of the SEC’s enforcement division after the financial crisis. Their boss, Richard Walker, the bank’s longtime general counsel (he left the bank this year) was once head of enforcement at the SEC.”

Elizabeth Warren to SEC chair: you make a 'disappointing' Wall Street cop

Ben-Artzi added that Mary Jo White, the current chair of the SEC, has known both Rice and Khuzami for as long as 20 years. She “bears the ultimate responsibility for the Deutsche fine”, he wrote.
“We brought all of the charges supported by the evidence and the law, which were unanimously approved by the Commission,” Andrew Ceresney, director of the division of enforcement, said in a statement provided to the Guardian.
White’s ties to the banking industry had previously drawn ire from Massachusetts senator Elizabeth Warren. Last year, Warren sent White a 13-page letter telling her that she found her performance as Wall Street’s top cop “disappointing”.

Ben-Artzi, who was fired by Rice, said that being let go ruined his Wall Street career. He now works as vice-president of risk analytics at BondIT, a fixed-income portfolio management company.
Sherron Watkins, who blew the whistle on accounting irregularities at Enron, previously said that more than a decade later she was unable to get a job in corporate America.

“I have this label ‘whistleblower’ which is synonymous with troublemaker,” she said in 2014, before praising SEC’s whistleblower program. “That’s sort of the story of even the most well-known whistleblowers ... You are out of your industry. That’s why I welcome this program, because you have to reinvent yourself and it’s not always easy. Rarely do people have the notoriety that I have, where I am on the lecture circuit. It’s a problem.”
In his op-ed, Ben-Artzi said that while he needs the award money “now more than ever”, he will “not join the looting” of the Deutsche Bank shareholders.

One whistleblower gets $30m in the bank, but others count the personal cost

“I never intended to turn a job in risk management into a crusade, but after suffering at the hands of the Deutsche executives I will not join them simply because I cannot beat them,” he wrote.
He added that he would happily collect the award if the money was “clawed back from the bonuses paid to the Deutsche executives, especially the former top SEC attorneys”.

Earlier this year, while awarding its second largest whistleblower award at $17m, SEC noted that the award program is instrumental in encouraging people with insider knowledge to come forward. By June, the SEC whistleblower program had awarded more than $85m to 32 whistleblowers. According to an analysis by the Wall Street Journal, more awards are coming. SEC settlements with State Street Corp and Bank of New York Mellon Corp could lead to a number of whistleblower awards totaling $100m, according to WSJ.

Public coverage of the award announcement often leads to more tips being sent to the SEC. Yet as Ben-Artzi’s op-ed shows, the results are not always to the whistleblower’s liking.
According to the Financial Times, Ben-Artzi is the first whistleblower to refuse an award since the program was launched in 2011.