- E-mails show discussions on firing traders amid Libor scandal
- Internal script disclosed in filing to German regulators
Deutsche Bank AG traders should be wary of calls that start with a thank you.
“Thank you for making yourself available for this call today,” reads the first line of a two-page draft script obtained by Bloomberg News that was used to fire at least one trader caught up in the Libor scandal.
The niceties quickly fall away.
“We have decided that your employment agreement should be terminated with immediate effect by reason of your gross misconduct, which in the opinion of the bank is serious enough to prejudice the business and reputation of the bank,” the speaker would continue. “Your dismissal will be effective immediately and you will not be entitled to any period of notice or payment in lieu of notice.”
The text -- part of a cache of documents showing internal discussions on how to handle the exits of high-profile traders such as Guillaume Adolph and Christian Bittar-- shows how executives reacted on one front as the London interbank offered rate scandal mushroomed in 2011.
Deutsche Bank, like many financial institutions caught up in revelations that traders were manipulating Libor benchmarks, made quick decisions to let traders go after internal reviews. Sometimes, the speed of the investigations may have given the highly compensated bankers grounds to sue.
Still, the bank determined it would be cheaper to pay a possible 70,000-pound ($107,000) claim for unfair dismissal rather than risk a protracted personnel review that could uncover information "prejudicial" to the bank in the Libor inquiry, a Deutsche Bank lawyer told executives, according to an internal e-mail.
Deutsche Bank paid a record $2.5 billion in fines to global regulators and prosecutors over Libor in April. The bank was criticized by the U.K. Financial Conduct Authority for its "unacceptably slow and ineffective response” to questions and repeated “false, inaccurate or misleading” statements to the watchdog.
The cache of e-mails, letters and confidential memos was included in an August statement to German finance regulator Bafin by former Deutsche Bank global finance chief Alan Cloete. They were intended to rebut Bafin’s criticism of his handling of the Libor scandal by showing the speedy action that was taken.
Deutsche Bank in London declined to comment on the contents of the Cloete documents.
The documents center on two traders, Adolph and Bittar. Bittar was paid a bonus of as much as 90 million pounds in 2008. Both men have been reviewed by U.K. investigators, but neither has been charged.
Lawyers for Cloete and Adolph declined to comment while an attorney for Bittar couldn’t be reached. Adolph reached an out of court settlement with Deutsche Bank after the firm tried to withhold some of his stock awards that had already vested, two people familiar with the case said in 2013.
The firing script offered an upside, explained by the in-house lawyer in the e-mail to bank executives: "We are proposing to continue to pay his legal fees whilst he cooperates with the bank so it may be that is sufficient ‘carrot’ for him not to pursue a claim."
The discussions also show that the bank tried to prevent traders vesting their full stock awards. In a letter to former co-Chief Executive Officer Anshu Jain dated December 2011, Cloete recommends they terminate Bittar to "best protect the bank" in light of what he’d be due in 2012.
The e-mails from inside the German lender come as a swathe of unfair dismissal claims from bankers have inundated the U.K. employment tribunals in recent weeks. Former workers at banks including Citigroup Inc., HSBC Holdings Plc and Lloyds Banking Group Plc have sued over terminations related to Libor and a similar global investigation into currency manipulation.
In Frankfurt, Deutsche Bank lost a suit against four Libor traders in Germany over their dismissals in 2013; the four were then reinstated at the bank.
Most employment claims in the U.K. must be filed within three months of a dismissal to be allowed to proceed. Damages in employment cases are normally capped at about 78,300 pounds, unless there is a finding of discrimination or the claimant wins status as a whistle-blower.
The scripts also include a list of suggested responses to a trader in the process of losing his job. The primer advises the speaker not to “become involved in a detailed discussion of the facts” surrounding the basis for the termination.
“You may just simply wish to say: ‘We appreciate the points that you are making but can assure you that the Bank has thoroughly reviewed the available evidence and has now reached a conclusion.”
And if the employee complains the bank hasn’t followed the “usual disciplinary process” -- there’s an answer for that too.
“In the light of your interviews and the documents which have been discovered, we have reached the conclusion that your conduct does amount to gross misconduct and thus the appropriate course of action is to dismiss you immediately,” the speaker should say. “We do not think that any further hearings would alter that conclusion.”