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Deutsche Bank Whistleblower Exposes Multi-Billion Dollar Securities Violations

Deutsche Bank Whistleblower Exposes Multi-Billion Dollar Securities Violations

Former Risk Analyst Represented by Labaton Sucharow and the Government
Accountability Project

PR Newswire

WASHINGTON, Dec. 5, 2012

WASHINGTON, Dec. 5, 2012 /PRNewswire/ --Today, Labaton Sucharow LLP and the
Government Accountability Project (GAP) announce their representation of a
whistleblower who is alleging multi-billion dollar securities violations at
Deutsche Bank, the Germany-based global investment bank. The alleged
misconduct was first publicly disclosed in an article published by the
Financial Times today. Dr. Eric Ben-Artzi is believed to be the first SEC
whistleblower to share his story publicly.

Ben-Artzi, a former Quantitative Risk Analyst at Deutsche Bank responded, "I
never wanted or expected to be a whistleblower. I reported internally first
and extensively, in accordance with bank policies and procedures. As the
problem was not acknowledged or corrected, I felt compelled to inform the
proper law enforcement authorities. Unfortunately, my family and I are paying
a heavy price for doing the right thing."

Reported Securities Violations

Dr. Ben-Artzi discovered and internally reported possible securities
violations stemming from Deutsche Bank's failure to accurately report the
value of its credit derivatives portfolio. Specifically, between mid-2007 and
2010, the bank failed to properly value the gap option component in its
portfolio of Leveraged Super Senior ("LSS") tranches of credit derivatives.
The gap option is the difference between the collateral paid by the LSS note
buyer and the mark-to-market expected loss that the LSS note seller agreed to
cover. With a $120-$130 billion portfolio in notional value, Deutsche Bank was
the largest holder of LSS trades in the marketplace. By not accurately valuing
it, the bank was able to maintain its carefully crafted public image that it
was weathering the financial crisis better than its peers – many of which
required financial assistance from the government and experienced significant
deterioration in their stock prices. Even using conservative assumptions, if
the LSS portfolio had been properly valued, the bank would have substantially
missed its earnings estimates. Due to these material misrepresentations,
countless investors may have been harmed.

Deeply troubled by the bank's unwillingness to acknowledge and appropriately
address this significant valuation problem, Dr. Ben-Artzi sought legal
representation from Labaton Sucharow and reported the possible securities
violations to the U.S. Securities and Exchange Commission through the SEC
Whistleblower Program. The program, established by the Dodd-Frank Wall Street
Reform and Consumer Protection Act in July 2010, has broad international reach
and offers eligible whistleblowers significant employment protections,
monetary awards and the ability to report anonymously.

Dr. Eric Ben-Artzi has worked in positions of significant responsibility at
major financial institutions. He has unique expertise with the models,
assumptions and calculations necessary to properly value and assess risk
associated with derivatives. Earlier, he earned his Ph.D. from the Courant
Institute at New York University where he also taught undergraduate courses in
mathematics and financial engineering.

"When Dr. Ben-Artzi first consulted with me, I was shocked by the size and
scope of the alleged misconduct," said Jordan Thomas, a former SEC Assistant
Director and Chair of the Whistleblower Representation Practice at Labaton
Sucharow. "This is exactly the type of significant and unreported securities
violations that the SEC Whistleblower Program was intended to address. It is
one of many high-profile matters in the pipeline."

Employment Retaliation

Dr. Ben-Artzi repeatedly attempted to work through internal reporting
channels, at increasingly higher levels, to correct the valuation problem. As
alleged in his retaliation complaint filed with the Department of Labor, when
he pressed his concerns further, he was subjected to severe hostility,
isolated, denied access to records necessary to perform his job, lost his job
independence and was stripped of responsibilities. In November 2011, shortly
after returning from paternity leave, Deutsche Bank informed Dr. Ben-Artzi
that his position had been moved to Europe and laid him off without warning,
the chance to move with his job, or a real opportunity to find a new position
within the financial institution. At all times prior to this illegal
employment action, Dr. Ben-Artzi had received favorable performance reviews,
and when laid off, was being recruited to work in other groups within the bank
due to his professional expertise and reputation. Accordingly, GAP agreed to
represent Dr. Ben-Artzi in his retaliation case, alleging violations of the
whistleblower protection provisions contained within the Sarbanes-Oxley Act.

Tom Devine, GAP Legal Director and author of the award-winning Corporate
Whistleblower's Survival Guide, commented: "This is a classic illustration of
what whistleblowers risk when trying to work within the system at firms acting
in bad faith. Dr. Ben-Artzi was a model corporate citizen who discovered SEC
violations that could incur serious liability, and stuck his neck out
internally to warn bank management. Deutsche Bank's response was to personally
harass him, and fire him as soon as it pinned down what he knew. The
retaliation was crude, and not camouflaged. Quite clearly, the point was to
scare other would-be whistleblowers into silence. The lesson learned is that
working within Deutsche Bank's corporate compliance and reporting system is an
act of professional suicide."

Bank Employee 'Know Your Rights' Campaign

In October, GAP launched a nationwide educational campaign aimed at employees
of large banks and financial institutions. This educational Know Your Rights
campaign, one of the first major coordinated national efforts of its kind,
seeks to inform workers of whistleblower protections and incentives that
potentially apply to them, if they have witnessed or are aware of wrongdoing.
Among other things, tens of thousands of leaflets were distributed at banks
and financial intuitions in 15 major cities across the country, informing
workers of their protections.

Dr. Ben-Artzi's case serves as a great example of the need for this important
public awareness campaign. More information can be found at
www.BankWhistleblower.org. 

About Us

Labaton Sucharow, one of the nation's premier law firms, has been a champion
of investor and consumer rights for close to 50 years. It was the first law
firm in the country to establish a practice exclusively focused on protecting
and advocating for whistleblowers who report possible violations of the
securities laws. Building on the firm's top ranked securities litigation
platform, the Whistleblower Representation Practice leverages a world-class
in-house team of investigators, financial analysts, and forensic accountants
with federal and state law enforcement experience to provide unparalleled
representation for whistleblowers.

The Government Accountability Project is the nation's leading whistleblower
protection organization. Through litigating whistleblower cases, publicizing
concerns and developing legal reforms, GAP's mission is to protect the public
interest by promoting government and corporate accountability. Founded in
1977, GAP is a non-profit, non-partisan advocacy organization based in
Washington, D.C.

SOURCE Labaton Sucharow LLP; Government Accountability Project

Website: http://www.labaton.com
Contact: Steve Bodakowski for Labaton Sucharow, +1-203-254-1300 ext 141, or
Dylan Blaylock, GAP Communications Director, +1-202-457-0034 ext. 137,
+1-202-236-3733 cell, dylanb@whistleblower.org