DIGITAL CURRENCY BUSINESS SETTLES ALLEGATIONS OF NOT MAINTAINING APPROPRIATE ANTI-MONEY LAUNDERING PROGRAM

FROM:  U.S. JUSTICE DEPARTMENT
Tuesday, May 5, 2015
Ripple Labs Inc. Resolves Criminal Investigation

Ripple Labs Inc. and its wholly-owned subsidiary, XRP II LLC, formerly XRP Fund II LLC, have agreed to resolve a criminal investigation in exchange for a settlement agreement calling for a series of substantial remedial measures, including a migration of a portion of Ripple’s virtual currency business to a separate entity, the company’s ongoing cooperation in other investigations, an extensive remedial framework to ensure future compliance with federal laws and forfeiture and penalties totaling $700,000, announced U.S. Attorney Melinda Haag of the Northern District of California, Director Jennifer Shasky Calvery of the U.S. Treasury Department Financial Crimes Enforcement Network (FinCEN) and Chief Richard Weber of the Internal Revenue Service (IRS) Criminal Investigation Division.  The agreement will resolve allegations that Ripple and its subsidiary failed to follow the law while engaging in the exchange of virtual currency and that the entities failed to establish and maintain an appropriate anti-money laundering program.

Ripple Labs Inc. is headquartered in San Francisco, California, and developed and sold virtual currency known as “XRP.”  As of 2015, the currency of the Ripple network, XRP, is the second-largest digital currency by market capitalization.

The agreement formalizes the steps Ripple and its subsidiary must take to bring its virtual currency operation within the existing regulatory framework for money services businesses.  The agreement consists of a settlement agreement, an agreed statement of facts, and a remedial framework for the company going forward.  Aside from monetary penalties in the form of forfeiture, the remedial framework requires the migration of any component of Ripple’s business that is engaged in the exchange of virtual currency into an entity registered with FinCEN.  In addition, the agreement calls for continued enhancements to the company’s anti-money laundering (AML) controls and training program.  Further, the remedial framework calls for external audits through the year 2020, enhancements to the ripple protocol, increased transaction monitoring and an extensive review of historical activity.

“By these agreements, we demonstrate again that we will remain vigilant to ensure the security of and prevent the misuse of the financial markets,” said U.S. Attorney Haag.  “Ripple Labs Inc. and its wholly-owned subsidiary both have acknowledged that digital currency providers have an obligation not only to refrain from illegal activity, but also to ensure they are not profiting by creating products that allow would-be criminals to avoid detection.  We hope that this sets an industry standard in the important new space of digital currency.”

The agreement is the culmination of a criminal investigation conducted by U.S. Attorney’s Office and the Internal Revenue Service’s Criminal Investigation Division.  FinCEN joined the investigation with a parallel civil enforcement action.  In that action, Ripple Labs and XRP II have agreed to pay a $700,000 civil penalty, $450,000 of which will be designated a forfeiture to settle issues raised in the U.S. Attorney’s investigation.

“Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws,” said Director Calvery for FinCEN.  “Innovation is laudable but only as long as it does not unreasonably expose our financial system to tech-smart criminals eager to abuse the latest and most complex products.”

“Federal laws that regulate the reporting of financial transactions are in place to detect and stop illegal activities, including those in the virtual currency arena,” said Chief Weber of the IRS Criminal Investigation Division.  “Unregulated, virtual currency opens the door for criminals to anonymously conduct illegal activities online, eroding our financial systems and creating a Wild West environment where following the law is a choice rather than a requirement.”

Ripple described itself as an exchanger of virtual currency in a December 2013 filing made in San Francisco, California, federal court in an unrelated case.  As an exchanger, Ripple was required to register with FinCEN and to comply with applicable federal laws and regulations.  Yet Ripple sold XRP even though it had not registered with FinCEN, effectuating sales of over approximately $1.3 million in April 2013 alone.  Ripple also failed to establish and maintain an appropriate AML program and failed to have policies, procedures and internal controls to ensure compliance with the Bank Secrecy Act and anti-money laundering laws.  In July 2013, Ripple incorporated a subsidiary, now known as XRP II, that replaced Ripple as the seller of XRP.  Although XRP II registered with FinCEN, it failed to have an effective AML program or to file appropriate suspicious activity reports.  In late 2013, for example, it negotiated a $250,000 transaction with an individual who had prior felony convictions for dealing in explosive devices and had been sentenced to prison, failing to follow its own internal “know your customer” requirements.

Assistant U.S. Attorneys Kathryn R. Haun and Arvon J. Perteet handled the matter on behalf of the U.S. Attorney’s Office with the assistance of Daniel Charlier-Smith and Leslie Cook.  The settlement agreement with Ripple Labs was the result of a coordinated effort by the U.S. Attorney’s Office and IRS Criminal Investigation, working in tandem with FinCEN.

Statement on Proposed Rules for U.S. Personnel and Certain Activities of Non-U.S. Person’s Security-Based Swaps Dealing

Statement on Proposed Rules for U.S. Personnel and Certain Activities of Non-U.S. Person’s Security-Based Swaps Dealing

Labor Department News Releases Update

Labor Department News Releases Update

SEC.gov | Toward Healthy Companies and a Stronger Economy: Remarks to the U.S. Treasury Department’s Corporate Women in Finance Symposium

SEC.gov | Toward Healthy Companies and a Stronger Economy: Remarks to the U.S. Treasury Department’s Corporate Women in Finance Symposium

RINGLING BROS. SETTLES WITH DOL RELATED TO FALL INCIDENT INVOLVING 9 EMPLOYEES

FROM:  U.S. DEPARTMENT OF LABOR 

Ringling Bros. to enhance safety for all aerial acts after settlement agreement

9 employees injured in May 2014 fall in Providence, Rhode Island

BOSTON — Ringling Bros. and Barnum & Bailey Circus, will implement ongoing safety enhancements in aerial acts to protect employees against injuries like those sustained by its aerialists during a May 4, 2014, performance in Providence, Rhode Island. Feld Entertainment Inc., headquartered in Palmetto, Florida, owns the circus.

The proactive measures are part of a settlement agreement with the U.S. Department of Labor concerning a citation issued to the circus by the department's Occupational Safety and Health Administration in connection with a 2014 incident in which eight employees were badly hurt. They were performing an act called a "Hair Hang" when the carabiner used to support them failed and they fell more than 15 feet to the ground. The aerialists, along with a ninth employee who was struck by the falling workers, sustained serious injuries.
OSHA's inspection determined that the carabiner used to lift performers was not loaded according to manufacturer's instructions. The agency cited the circus for one serious violation of occupational safety standards and proposed the maximum fine of $7,000. The circus initially contested its citation and penalties to the independent Occupational Safety and Health Review Commission.

"This agreement goes beyond this one case. It commits Ringling Bros. to continual, effective and detailed corrective action that will address and enhance safety for all its aerial acts, so that catastrophic incidents, such as the Providence fall and the needless worker injuries that resulted, never happen again," said Patrick Griffin, OSHA's area director in Rhode Island.

"We sought and achieved a settlement that will maximize safety for the circus' employees and minimize the possibility of future falls and injuries. It's incumbent upon the circus to follow through on its pledge with a thorough, effective, proactive and continuous safety program," said Michael Felsen, the department's regional solicitor of labor for New England.

Under the settlement, the circus agrees to take the following actions on an ongoing basis:

All new and existing aerial acts will be reviewed by a registered professional engineer.

For each act, assemble and provide to each circus unit a technical book.
Develop a written checklist for equipment and hardware inspections for each act.
Each circus unit will conduct an annual safety day that will address employee safety topics.

The circus will also pay the full OSHA fine and submit documentation that the hazard has been corrected and preventive measures put in place. The settlement will become a final order of the Occupational Safety and Health Review Commission on May 13, 2015.

The Providence Area Office conducted the OSHA investigation. Senior trial attorney Carol J. Swetow of the department's regional Office of the Solicitor in Boston litigated the case for OSHA.

ASSISTANT AG CALDWELL'S REMARKS ON CORPORATE COMPLIANCE AND ENFORCEMENT

FROM:  U.S. JUSTICE DEPARTMENT 

Assistant Attorney General Leslie R. Caldwell Delivers Remarks at New York University Law School’s Program on Corporate Compliance and Enforcement

New York City, NYUnited States ~ Friday, April 17, 2015

Good afternoon, and thank you for that kind introduction.  Thank you, Professor Arlen, for facilitating this important conference and for inviting me to join today’s conversation, and thank you to NYU for hosting this event.  I am honored to speak with this audience of leaders in the field of corporate compliance and enforcement, an area to which I have dedicated much of my own professional career.

I want to focus my remarks this afternoon on the Criminal Division’s efforts to increase transparency in its corporate prosecutions.

For the past year, I have had the pleasure of leading the Justice Department’s Criminal Division, which includes approximately 600 attorneys from 17 sections and offices.  Our attorneys investigate and prosecute crimes, develop criminal law and policies and promote the rule of law abroad.  While most of the U.S. Attorneys’ Offices around the country focus on prosecuting crime in their respective districts, the Criminal Division—often in partnership with U.S. Attorneys’ Offices—focuses on issues that affect the nation as a whole, and frequently participates in investigations that are international in scope.

Among the sections that I oversee are two sections that do a significant number of corporate prosecutions.  The Criminal Division’s Fraud Section plays a unique and essential role in the department’s fight against sophisticated economic crime, bringing complex securities and commodities fraud cases, health care fraud prosecutions and Foreign Corrupt Practices Act (FCPA) cases.  I also oversee the Asset Forfeiture and Money Laundering Section—known as AFMLS—which pursues prosecutions against institutions and individuals engaged in money laundering, Bank Secrecy Act violations and sanctions violations.  AFMLS attorneys also forfeit the proceeds of high-level foreign corruption through the Kleptocracy Asset Recovery Initiative.  The investigations handled by the Fraud Section and AFMLS are increasingly global in nature, and our Office of International Affairs plays a significant role in helping us gather evidence and secure the return of fugitives from abroad.  

One of my priorities in the Criminal Division is to increase transparency regarding charging decisions in corporate prosecutions.  I know that many corporate counsel have concerns about what they perceive as a lack of transparency in how the department decides when to bring charges, or to seek some lesser resolution.

Greater transparency benefits everyone.  The Criminal Division stands to benefit from being more transparent in part because if companies know the benefits they are likely to receive from self-reporting or cooperating in the government’s investigation, we believe they will be more likely to come in and disclose wrongdoing and cooperate.  And on the flip side, companies can better evaluate the consequences they might face if they do not receive cooperation credit.  Transparency also helps to reduce any perceived disparity, in that companies can compare themselves, as best as possible, to other similarly-situated companies engaged in similar misconduct.

There are often limits to how much we can disclose about our investigations and prosecutions—particularly for investigations in which no charges were brought—but we are trying to be more clear about our expectations for corporate cooperation and the bases for our corporate pleas and resolutions.

One of the themes of today’s program is the shaping of corporate culture.  Shaping corporate culture through deterrence is an area where the Criminal Division plays an important role.  One important purpose of criminal prosecution of corporations is the deterrence of future would-be wrongdoers.  But to achieve deterrence, the Criminal Division must transparently communicate its expectations and the consequences of corporate misconduct.  An opaque or unreasoned enforcement action carries little deterrent effect.

We recognize the productive role we can play in influencing corporate conduct, and we take seriously the effects of our enforcement actions.  Wherever possible, we try to communicate clear guidance to the corporate community through our criminal resolutions, our interactions with companies and their counsel during an investigation or prosecution and other channels such as conferences like this one.

During my first year in leading the Criminal Division, we have tried to make as clear as possible what we expect from those companies that choose to cooperate.  Put simply, if a company wants cooperation credit, we expect that company to conduct a thorough internal investigation and to turn over evidence of wrongdoing to our prosecutors in a timely and complete way.  Perhaps most critically, we expect cooperating companies to identify culpable individuals—including senior executives if they were involved—and provide the facts about their wrongdoing.

As this sophisticated audience knows, there is no “off the rack” internal investigation that can be applied to every situation at every company.  Effective investigations must be tailored to the unique misconduct at issue and the circumstances of each company.  But, there are hallmarks of all good internal investigations.  Chief among them is the identification of wrongdoers.  Prosecuting individuals, including corporate executives, for their criminal wrongdoing is a top priority for the Criminal Division.  Corporations seeking cooperation credit should conduct their internal investigations with those principles in mind.

The mere voluntary disclosure of corporate misconduct—by itself—is not enough.  All too often, corporations expect cooperation credit for voluntarily disclosing and describing the corporate entities’ misconduct, and issuing a corporate mea culpa.  True cooperation, however, requires identifying the individuals actually responsible for the misconduct—be they executives or others—and the provision of all available facts relating to that misconduct.

Investigations must also be independent and designed to uncover the facts, not to spread company talking points or whitewash the truth.  We expect that the complete facts about the wrongdoing will be provided, and in a timely way.  As we work to be transparent, we expect transparency in return.  Transparency is a two-way street, and we expect companies that are claiming to cooperate to walk the walk.

The Criminal Division, meanwhile, will conduct its own investigation.  We will pressure test a company’s internal investigation with the facts we gather on our own, and we will consider the adequacy of an internal investigation when we evaluate a company’s claim of cooperation.

Let me be clear, however, the Criminal Division does not dictate how a company should conduct an investigation.  If a company decides to conduct an internal investigation and seek cooperation credit, that company must determine how best to conduct its own internal investigation.  Although we can provide guideposts, the manner in which an internal investigation is conducted is an internal corporate decision.

All too often, criticism is leveled against the Justice Department for purportedly causing companies to spend years, and many millions of dollars, investigating potential violations.  This is particularly true in the FCPA context where the need for international evidence can add to the expense and burden of an investigation.  Critics wrongly question the wisdom of disclosing misconduct and cooperating with the government in light of what they perceive to be the department’s requirement that companies then must conduct unnecessarily costly, time consuming and widespread investigations.

There is no question that some cooperating companies spend large sums of money investigating potential misconduct and correcting internal controls issues that allowed the misconduct to occur.  The decision to incur those costs, however, is one made by those companies, not a requirement of the department.  When a company chooses to cooperate with the government, the manner in which the company approaches its cooperation, and its own investigation of the conduct, can significantly affect the length of the investigation and the costs incurred by the company.

Although we expect internal investigations to be thorough, we do not expect companies to aimlessly boil the ocean.  Indeed, there have been some instances in which companies have, in our view, conducted overly broad and needlessly costly investigations, in some cases delaying our ability to resolve matters in a timely fashion.

For example, if a company discovers an FCPA violation in one country, and has no basis to suspect that violations are occurring elsewhere, we would not necessarily expect it to extend its investigation beyond the conduct in that country.  On the other hand, if the same people involved in the violation also operated in other countries, we likely would expect the investigation to be broader.

This example is not intended to suggest the proper scope of an investigation of any given matter.  My point instead is that, to receive cooperation credit, we expect companies to conduct appropriately tailored investigations designed to root out misconduct, identify wrongdoers and provide all available facts.  To the extent a company decides to conduct a broader survey of its operations, that decision, and any attendant delay and cost, are the result of the company’s choices, not the department’s requirement.

To assist cooperating companies in appropriately targeting their investigations, to the extent possible, we will make clear to those companies our areas of interest.  I tell my prosecutors that where possible, if it would not compromise our own investigation, we should share information about our investigation with a cooperating company to help focus the company’s internal inquiry.  I encourage an open dialogue between company counsel and our prosecutors about the progress of the internal investigation.  Companies that truly demonstrate a commitment to cooperation will find that this dialogue comes easily.

As is their right, corporations may also choose not to cooperate with the government.  But, they too must understand the consequences of their decisions.  The lack of timely and complete cooperation, which effectively frustrated the prosecution of culpable individuals, was one of the tipping points leading to charges, guilty pleas and landmark monetary penalties in the BNP Paribas and Credit Suisse cases last year.  BNPP’s failure to cooperate was expressly referenced in the plea agreement in which the bank admitted guilt and agreed to pay nearly $9 billion in financial penalties.

Likewise, a company’s decision not to cooperate may delay, but rarely thwarts, our investigation.  In a recently announced FCPA case against Alstom, a French power and transportation company, the company opted not to cooperate for years.  The Criminal Division performed an extensive investigation without the company’s cooperation.  Today, four individual Alstom executives have been charged with FCPA crimes; three of the executives have pleaded guilty; Alstom’s consortium partner, Marubeni, was charged and pleaded guilty after also opting not to cooperate, and Alstom pleaded guilty and paid a $772 million penalty—the largest criminal penalty in the history of the FCPA.

These are all facts that a company must consider in deciding whether to cooperate with our criminal investigation.  A company must choose on its own whether to conduct an internal investigation or to cooperate.  For our part, when we have them, we can openly provide facts and reference points to allow the company to make an informed decision about the scope of its investigation.

We recognize that information about the bases for our corporate guilty pleas and resolutions is an important reference point for companies that are evaluating whether to self-disclose a violation or cooperate.  Corporations may wish for a formula or definitive matrix that could be applied in this context.  But, while a rote formula might bring certainty and consistency, it would do so at the expense of the individualized justice that comes with thoughtful and nuanced prosecutorial decision-making.

For decades, the department has disclosed the factors that prosecutors must evaluate when considering corporate criminal charges and resolutions.  The corporate prosecution principles were originally adopted two decades ago—in the Holder Memo, issued when now Attorney General Holder was the Deputy Attorney General—and have been refined through the years into the current Filip Memo, otherwise known as the Principles of Prosecution of Business Organizations.

This audience is no doubt versed in the comprehensive considerations laid out in the nine Filip factors, which are publicly available on the Internet.  When applied to a particular case against a business organization, the factors could lead to charges, a deferred prosecution agreement or a non-prosecution agreement—known as DPAs and NPAs—or a declination.

Arriving at a corporate resolution requires a unique balancing of the Filip factors in each case.  But this balancing does not take place in a prosecutorial vacuum.  In virtually every instance, we invite company counsel to make a presentation regarding the application of the Filip factors in the case at hand before we make a charging decision.  Again, wherever possible, we encourage an open and transparent dialogue between the company and our prosecutors at every stage.

In each of our corporate resolutions—be it a guilty plea, NPA or DPA—we provide an explanation of the key factors that led to our decision.  The factual statements filed with resolution documents typically include a detailed recitation of the misconduct, as publicly admitted by the company.  The actual agreements outline the factors that were significant in determining the type of resolution, such as the corporation’s cooperation—if any—and remedial measures.  We usually publicly announce corporate resolutions and pleas, and make the documents available on our website.

In the future, you should expect that our resolutions will include even more detailed explanations of our considerations.  This is a priority of mine.  While these documents already provide significant insight into our thought processes, they will soon provide an even greater explanation of our analysis and conclusions.

In addition to their use as enforcement tools, our plea agreements, DPAs and NPAs provide a transparent explanation of the department’s expectations when it comes to compliance programs.  Companies seeking to measure their own compliance programs need look no further than many of the resolutions we have made publicly available.

DPAs and NPAs provide explicit roadmaps for companies to get back on track, sometimes under the watchful eye of a monitor or court.  There is perhaps no more transparent guidance to a specific corporation than the terms in a DPA or NPA, especially when we set forth remedial or compliance measures we expect.

These agreements have real teeth.  When companies subject to a NPA or DPA are required to cooperate and fail to do so, or where they engage in other criminal conduct during the term of the agreement, the Criminal Division will not hesitate to tear up a DPA or NPA and file criminal charges, where such action is appropriate and proportional to the breach.  The Criminal Division’s role is not just to set guideposts for companies that have engaged in significant misconduct, but to prosecute those corporations when they ignore those guideposts.  Just as with individuals, companies are expected to learn from their mistakes.  A company that is already subject to a DPA or NPA for violating the law should not expect the same leniency when it crosses the line again.

Over the course of my career, I have found that when it comes to affecting corporate conduct, nothing has a more powerful impact than concrete examples.  Such examples have traditionally stemmed from publicized corporate prosecutions, as it is more challenging to publicize investigations in which we decline to file charges.  The department has maintained a long-standing practice not to discuss non-public information on matters it has declined to prosecute, based in large part on concerns about the privacy rights and interests of uncharged parties.  There are serious privacy concerns inherent in publicly identifying an individual who was implicated in our criminal investigation if we eventually decide not to bring charges.  Indeed, internal department policy prohibits us from publicly identifying those individuals who have been investigated, but not charged.

Likewise, companies often strongly oppose publicity that they were under Justice Department scrutiny, even if we ultimately declined to prosecute.

The challenge we are currently working to address is how to publicize these cases while taking into consideration the legitimate concerns of the companies and individuals who were under investigation.  We are looking for ways to better inform the community about cases in which we decline to prosecute, as there is often as much to learn from a decision not to bring charges as a decision to prosecute.  We seek not just to prosecute, but to encourage and reward good corporate citizenship, and increasing transparency can play an important role in achieving that goal.

A significant example of our efforts in this regard is the Foreign Corrupt Practices Act Resource Guide published by the Criminal Division and the Securities and Exchange Commission.  The Guide has a section on declinations and provides anonymized examples of real FCPA cases in which we declined to bring a prosecution.  Although each potential case is based on its own unique circumstances and facts, the examples in the Guide provide useful insight into the circumstances of real-world declination decisions.

The Criminal Division’s FCPA website continues this effort at transparency by posting relevant enforcement actions and opinion letters.  The department responds to opinion requests concerning enforcement intent about prospective actions that might violate the anti-bribery provisions of the FCPA.  This procedure enables companies and individuals to request a determination in advance as to whether proposed conduct would constitute a violation of the FCPA.  These opinion letters are publicly available on our website.  While they are binding only on the party that makes the request, they provide significant guidance on the department’s approach to enforcing the FCPA.

Through these and other steps, the Criminal Division has prioritized increased transparency in our corporate investigations and prosecutions.  We strive to disclose more information, to the extent we can, while protecting ongoing investigations and privacy rights.  And we encourage companies to do the same—to self-disclose criminal violations and to cooperate with our investigations—or risk the consequences.

Thank you for inviting me to speak with you all today.  I would be remiss if I did not point out that opportunities to speak at conferences like this one enable increased transparency and productive dialogue.  I appreciate your creating an open forum for these discussions.

I look forward to addressing any questions that you might have.

DEUTSCHE BANK SUBSIDIARY PLEADS GUILTY FOR ROLE IN LIBOR MANIPULATION CASE

FROM:  U.S. JUSTICE DEPARTMENT

Thursday, April 23, 2015

Deutsche Bank's London Subsidiary Agrees to Plead Guilty in Connection with Long-Running Manipulation of LIBOR

DB Group Services (UK) Limited, a wholly owned subsidiary of Deutsche Bank AG (Deutsche Bank), has agreed to plead guilty to wire fraud for its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark interest rate used in financial products and transactions around the world.  In addition, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges in connection with its role in both manipulating U.S. Dollar LIBOR and engaging in a price-fixing conspiracy to rig Yen LIBOR.  Together, Deutsche Bank and its subsidiary will pay $775 million in criminal penalties to the Justice Department.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office made the announcement.

DB Group Services (UK) Limited has agreed to plead guilty to one count of wire fraud, and to pay a $150 million fine, for engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating U.S. Dollar LIBOR contributions.

In addition, Deutsche Bank entered into a deferred prosecution agreement today and admitted its role in manipulating LIBOR and participating in a price-fixing conspiracy in violation of the Sherman Act by rigging Yen LIBOR contributions with other banks.  The agreement requires the bank to continue cooperating with the Justice Department in its ongoing investigation, to pay a $625 million penalty beyond the fine imposed upon DB Group Services (UK) Limited and to retain a corporate monitor for the three-year term of the agreement.

Together with approximately $1.744 billion in regulatory penalties and disgorgement—$800 million as a result of a Commodity Futures Trading Commission (CFTC) action, $600 million as a result of a New York Department of Financial Services (DFS) action, and $344 million as a result of a U.K. Financial Conduct Authority (FCA) action—the Justice Department’s criminal penalties bring the total amount of penalties to approximately $2.519 billion.

“For years, employees at Deutsche Bank illegally manipulated interest rates around the globe – including LIBORs for U.S. Dollar, Yen, Swiss Franc and Pound Sterling, as well as EURIBOR – in the hopes of fraudulently moving the market to generate profits for their traders at the expense of the bank’s counterparties,” said Assistant Attorney General Caldwell.  “Deutsche Bank is the sixth major financial institution that has admitted its misconduct in this wide-ranging criminal investigation, and today’s criminal resolution represents the largest penalty to date in the LIBOR investigation.”

“Deutsche Bank secretly conspired with its competitors to rig the benchmark interest rates at the heart of the global financial system,” said Assistant Attorney General Baer.  “Deutsche Bank’s misconduct not only harmed its unsuspecting counterparties, it undermined the integrity and the competitiveness of financial markets everywhere.”

“Deutsche Bank admitted to manipulating benchmark interest rates in currencies around the globe in order to benefit trading positions,” said Assistant Director in Charge McCabe.  “This wide reaching investigation represents yet another step in the FBI’s ongoing effort to find and stop those who deliberately participate in complex financial crimes to further their own bottom line.”

Deutsche Bank was a member of the panel of banks whose submissions were used to calculate the LIBORs for a number of currencies, including U.S. Dollar, Yen, Pound Sterling and Swiss Franc LIBOR, as well as EURIBOR (the Euro Interbank Offered Rate).

According to the agreements, from at least 2003 through early 2011, numerous Deutsche Bank derivatives traders—whose compensation was directly connected to their success in trading financial products tied to LIBOR—engaged in efforts to move these benchmark rates in a direction favorable to their trading positions.  Specifically, the derivatives traders requested that LIBOR submitters at Deutsche Bank and other banks submit contributions favorable to trading positions, rather than rates that complied with the definition of LIBOR.  Through these schemes, Deutsche Bank defrauded counterparties who were unaware of the manipulation.  Deutsche Bank admitted that the conduct affected the resulting LIBOR fix on various occasions.

Deutsche Bank further admitted that its employees engaged in this misconduct through face-to-face requests, electronic communications, which included both emails and electronic chats, and telephone calls.  For example, in an electronic chat on March 22, 2005, a Deutsche Bank U.S. Dollar LIBOR submitter explained how he would manipulate the rate for a trader in New York, stating, “if you need something in particular in the libors i.e. you have an interest in a high or a low fix let me know and there’s a high chance i’ll be able to go in a different level.  Just give me a shout the day before or send an email from your blackberry first thing.”

In another example described in the statement of facts, on May 17, 2006, the supervisor of LIBOR submissions in London received a request from a trader in New York asking, “If you can help we can use a high 3m fix tom.”  The supervisor replied to the trader and a U.S. Dollar LIBOR submitter, “I’m off but [submitter] is your libor man [] [submitter] could you take a look at 3s libor in the morning for [trader].”  The submitter agreed to accommodate the request, replying, “Will do chaps.”  The following morning, after he submitted the bank’s contribution, the submitter wrote to the trader, “I went in at 19+ for the 3m libor, as you’ll see it almost manage to reach 19.”

In an example from March 2007, a trader thanked one of Deutsche Bank’s EURIBOR submitters for his help in successfully manipulating EURIBOR, saying in an electronic chat: “Great job on this [Submitter], we can do more of this stuff,” to which the submitter replied, “WE CAN MY FRIEND. WE CAN….”  Later that day, the submitter bragged about Deutsche Bank’s manipulation by offices in Frankfurt and London in an email to the head of Deutsche Bank’s Global Finance Unit: “HAVE U SEEN THE 3MK FIXING TODAY? THAT WAS AN EXCELLENT CONCERTED ACTION FFT/LDN. CHEERS.”

Deutsche Bank also admitted to working with other banks to manipulate LIBOR contributions.  For instance, in a May 2009 electronic chat exchange, a UBS trader asked a Deutsche Bank trader, “cld you do me a favour would you mind moving you 6m libor up a bit today, i have a gigantic fix. . .”  The Deutsche Bank trader agreed.  The next day, the Deutsche Bank trader confirmed that the Yen LIBOR submission had been beneficial to the UBS trader, asking “u happy with me yesterday?”  The UBS trader acknowledged, “thx.”

By entering into a deferred prosecution agreement with Deutsche Bank, the Justice Department took several factors into consideration, including that Deutsche Bank’s cooperation with the government’s investigation was often helpful but also fell short in some important respects.  The department also considered the extensive remedial measures undertaken by Deutsche Bank’s management and its enhanced compliance program.  Deutsche Bank has agreed to continue cooperating with the government’s investigation, and the agreement does not prevent the Justice Department from prosecuting culpable individuals for related misconduct.  The documents will be filed in federal court in the District of Connecticut.

The Justice Department has previously announced resolutions with five other banks for their roles in manipulation of benchmark interest rates, including Barclays Bank PLC, UBS AG, The Royal Bank of Scotland plc, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) and Lloyds Banking Group plc.  The department has also charged 12 individuals as a result of this investigation, and three of those individuals have pleaded guilty.  The pending charges are merely accusations, and the defendants are considered innocent unless and until proven guilty.

This ongoing investigation is being conducted by special agents, forensic accountants and intelligence analysts of the FBI’s Washington Field Office.  The prosecution of Deutsche Bank is being handled by Assistant Chief Jennifer L. Saulino and Trial Attorney Alison L. Anderson of the Criminal Division’s Fraud Section and Trial Attorney Richard A. Powers of the Antitrust Division’s New York Field Office.  Deputy Chief Benjamin D. Singer and Assistant Chief Sandra Moser of the Criminal Division’s Fraud Section, Trial Attorney Daniel Tracer of the Antitrust Division’s New York Office, Assistant U.S. Attorneys Liam Brennan and Christopher Mattei of the District of Connecticut and the Criminal Division’s Office of International Affairs have also provided valuable assistance in this matter.

The investigation leading to these cases has required, and has greatly benefited from, a diligent and wide-ranging cooperative effort among various enforcement agencies both in the United States and abroad.  The Justice Department acknowledges and expresses its deep appreciation for this assistance.  In particular, the CFTC’s Division of Enforcement referred this matter to the department and, along with the FCA, has played a major role in the investigation.  The Securities and Exchange Commission has also played a significant role in the LIBOR series of investigations.  Various agencies and enforcement authorities in the United States and from other nations, including the United Kingdom’s Serious Fraud Office, BaFIN and the European Central Bank, are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.

This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.