CFO, others to leave Bankers Trust

Firings were hinted over botched probe


June 17, 1999|By BLOOMBERG NEWS

NEW YORK -- Bankers Trust Corp.'s chief financial officer and 12 others will leave after its new parent, Deutsche Bank AG, said it may fire executives of the U.S. unit for mishandling an investigation of illegal fund transfers.

Richard Daniel, the CFO, is the most senior executive to quit since Deutsche Bank bought New York-based Bankers Trust this month for $9 billion, becoming the world's biggest bank. He is leaving on his own accord "in the next few days," Dierk Hartwig, a Deutsche Bank spokesman, said yesterday.

Daniel was one of a few top officials responsible for investigating Bankers Trust's illegal transfers of customer funds to boost profits from 1994 to 1996, a practice that ended before he joined the bank in April 1996. Twelve other BT employees connected to the investigation are also quitting this week, said a person at the bank familiar with the resignations.

Deutsche Bank said in a federal filing after the purchase of Bankers Trust, parent of Baltimore's Alex. Brown, this month that it may fire BT executives for failing to act appropriately in investigating the funds transfer. BT had pleaded guilty to three felony counts and paid $63.5 million in fines for the transfers.

Daniel, 53, will be paid a fraction of his three-year, $22.5 million contract with Deutsche Bank because of his departure. Originally, he was to get a $9 million retention bonus, a minimum $4.15 million annual bonus and a salary of at least $350,000. Because he resigned, he won't get his retention bonus and won't get all three years' bonuses, a person familiar with the situation said.

A Deutsche Bank spokeswoman would not elaborate on terms of the resignation.

As owner of a bank with a criminal conviction, Deutsche Bank needs U.S. government permission to manage certain retirement funds. In applying to the Labor Department for such permission, Deutsche Bank said it may appoint a "special master" to review the activities of people who oversaw Bankers Trust's internal investigation of the funds transfers.

While criminal indictments are expected against people directly implicated in the fund transfers when they occurred, Deutsche's internal investigation could affect current Bankers Trust employees who weren't at the bank during the transfers.

By citing people "involved in responding to inquiries from any governmental agency regarding allegations," Deutsche Bank opens the issue of how cooperative Bankers Trust was with prosecutors or state auditors.

Bankers Trust had said it learned of the funds transfers in 1996 and promptly reported them to banking regulators and U.S. prosecutors. It pleaded guilty this March, three years later, to shifting $19.1 million of unclaimed customer funds into its own account.

According to the guilty plea in federal court, declining income in 1994 and 1995 led "the management of Bankers Trust to put significant pressure" on executives "to generate additional revenues and to lower expenses."

The charges outline how the unit that processes customers' securities transactions shifted dormant funds into the bank's own accounts.

Because the funds were used to boost earnings, Daniel, as the chief financial officer, was ultimately responsible for explaining how the fund transfers affected profits. In 1997, under his watch, the bank took a $20 million charge against earnings to restore the money to the dormant customer accounts. At the time it referred to it only as an "accounting" charge.

The internal investigation of the fund transfers occurred in a period when BT Chairman Frank Newman, who took charge in 1996, was supposed to be polishing the bank's image after an unrelated derivatives scandal.

Pub Date: 6/17/99

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