Deutsche Bank, Proxy Proposal, BofA Trader: Compliance

Deutsche Bank AG, Europe’s biggest investment bank by revenue, will review whether to punish senior employees including Alan Cloete for their roles in the interest-rate rigging scandal, according to a person with knowledge of the matter.

Deutsche Bank’s supervisory board will discuss punishments early in the week of Jan. 27, said the person, who asked not to be named as the meeting isn’t public. These include firing or disciplining Cloete -- who oversaw traders alleged to have sought to rig benchmark rates -- and employees responsible for how the bank dealt with the scandal, the person said.

Regina Schueller, a spokeswoman for Deutsche Bank, declined to comment on what may be discussed at the board meeting. The bank is cooperating with regulatory authorities, she said. Cloete didn’t respond to an e-mail seeking comment. Schueller declined to comment on his behalf.

Regulators around the world are investigating whether more than a dozen firms colluded to rig benchmark interest rates such as the London interbank offered rate, or Libor, for their own profit or to mask their true cost of borrowing.

The potential sanctions follow a Jan. 5 report in Der Spiegel that German banking regulator Bafin told Deutsche Bank in August that its management and supervisory boards didn’t adequately investigate and address the alleged rate-rigging. The German news magazine didn’t say where it got the information.

Cloete, who built Deutsche Bank’s structured credit finance business, leads operations in the Asia-Pacific region with former India chief Gunit Chadha. Cloete informed Jain of potential irregularities related to Libor in June 2011, the bank said in May.

Handelsblatt reported the board’s deliberations yesterday.

Compliance Policy

Draghi Faces Mission Conflict as ECB Reviews European Banks

The European Central Bank president Mario Draghi convenes the first rate-setting meeting of 2014 in Frankfurt today with a to-do list that includes supporting the recovery in the 18-nation currency bloc and carrying out a balance-sheet review of its largest lenders, two policy goals that could run into conflict.

The risk is that banks pull back even further on loans, derailing the already-fragile economic revival, to avoid being ordered to raise more capital.

The dilemma highlights the challenge of requiring the ECB to take on multiple responsibilities after politicians entrusted it with overseeing a banking system that nearly toppled the currency bloc two years ago. Draghi now has to balance his pledge to ease monetary policy if needed with an assurance that liquidity won’t be used to plug banks’ capital gaps.

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Investor Group Asks SEC to Ease Voting Rules in Proxy Battles

The Council of Institutional Investors petitioned the U.S. Securities and Exchange Commission to let shareholders vote for any combination of management and director nominees in cases of corporate proxy fights, the council said in an e-mailed statement.

The rule change would allow shareholders voting by proxy to split their votes among management-supported directors and so-called dissidents.

Nomura Sees Appeal in First Basel III Bank Bonds

Japan’s biggest banks may sell the nation’s first Basel III bonds as early as March after capital rules became clearer last month, Nomura Holdings Inc. said.

Mitsubishi UFJ Financial Group Inc. and other Japanese lenders cut subordinated debt offerings last year by 75 percent to 283 billion yen ($2.7 billion) as they waited for the regulator to clarify stricter balance sheet rules, data compiled by Bloomberg show. A premium of 30 to 50 basis points on the notes over similar securities prior to the new rules would make them attractive, according to Nomura.

Japanese lenders look set to follow global peers such as Industrial & Commercial Bank of China Asia Ltd. in selling debt that could be written down or rendered worthless in the event the banks are deemed at risk of becoming unviable. Japan’s Financial Services Agency issued draft guidelines on Dec. 13 clarifying when the regulator can order lenders to write off capital to inflict losses on debt holders rather than taxpayers.

Global watchdogs led by the Basel Committee on Banking Supervision are seeking to bolster banks’ balance sheets after the financial crisis exposed inadequate buffers against losses. New guidelines require a clause allowing regulators to write off subordinated debt if the issuer is at risk of becoming non-viable.

Financial institutions around the world have issued $57.7 billion of Basel III compliant bonds so far including offerings by Barclays Plc, Societe Generale SA and Banco Bilbao Vizcaya Argentaria SA.

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Compliance Action

Antitrust Fines Rise in 2013 on Libor, Car Parts, Study Shows

Antitrust fines in the European Union, U.S., Japan, Brazil, South Africa, Australia and Canada rose 10.5 percent to $4.2 billion last year because of record EU penalties against banks for Libor rigging and U.S. fines on car-parts suppliers, law firm Allen & Overy LLP said in a report published yesterday.

Allen & Overy cited U.S. statistics from Oct. 1, 2012, to Sept. 30.


JPMorgan Fails to Throw Out California Debt-Collection Case

JPMorgan Chase & Co. lost a bid to throw out a lawsuit by the California attorney general alleging that the largest U.S. bank by assets illegally tried to collect debt from about 100,000 credit-card borrowers.

California Superior Court Judge Jane L. Johnson in Los Angeles Jan. 7 rejected the bank’s argument that the attorney general’s unfair competition claims are invalid under California legal precedents.

JPMorgan’s lawyer, David Schrader, said at the hearing that he will ask the judge to certify her decision for immediate appeal to the California Court of Appeals. Deputy Attorney General Bernard Eskandari said he will oppose an immediate appeal, pointing out that the case has been pending for eight months.

Both Schrader and Eskandari declined to comment on the judge’s ruling.

The state seeks civil penalties of $2,500 for each violation of California law and an additional $2,500 for each violation against a senior citizen or a disabled person.

The case is People v. JPMorgan Chase & Co., BC508466, California Superior Court (Los Angeles County).

Sherwin-Williams Among Paint Makers Ordered to Pay $1.15 Billion

Sherwin-Williams Co., NL Industries Inc. and ConAgra Grocery Products LLC were ordered by a judge to pay $1.15 billion to replace or contain lead paint in millions of homes after losing a public-nuisance lawsuit brought by 10 California cities and counties.

The final order issued Jan. 7 by California Superior Court Judge James Kleinberg in San Jose replaces a tentative order issued last month and increases by $50 million the amount the companies must pay.

Bonnie J. Campbell, a spokeswoman for the paint manufacturers, declined to immediately comment on the final order.

Kleinberg on Dec. 16 tentatively ruled against the companies after a non-jury trial that lasted about five weeks. Two other defendants, Atlantic Richfield Co., a Los Angeles-based unit of BP Plc, and Wilmington, Delaware-based DuPont Co., won dismissal of the claims against them.

The local governments that sued broke the companies’ streak of victories in similar suits in seven other states. Los Angeles County will get $632.5 million for lead abatement in the final ruling, an increase of $27.5 million from Kleinberg’s tentative decision.

The case is California v. Atlantic Richfield Co., 1-00-cv-788657, California Superior Court, County of Santa Clara (San Jose).


Cameron Says Calls for Gaming-Machine Restrictions ‘Reasonable’

There are concerns about fixed-odds betting terminals, and more action may be needed to restrict their use, U.K. Prime Minister David Cameron said yesterday.

He made the remarks in response to questions posed to him in Parliament.

The government review will report in first half of year, Cameron, leader of the Conservative Party, said.

The opposition Labour Party scheduled a non-binding vote yesterday on giving local councils the power to ban high-stakes betting machines.

Comings and Goings

BofA Fired Asian Trader to Avoid Paying Her Bonus, Lawyer Says

Bank of America Corp. fired a trader who made three-quarters of the profits of its Asian distressed debt trading group to avoid paying the performance bonus she was entitled to, her lawyer said.

Sunny Tadjudin is claiming HK$28.3 million ($3.7 million) based on the average of 16.6 percent of her profit contribution she received in bonuses for 2002 to 2004, Graham Harris, her attorney, said on the first day of a trial at the Hong Kong High Court yesterday.

Tadjudin, fired in August 2007 for failings including poor communication, received lower bonuses than she deserved in 2005 and 2006 due to arbitrary performance reviews and no bonus in 2007 despite generating 76 percent of the group’s $28.6 million in profits in the 30-month period, Harris said. The 50-year-old woman won the right to a trial in 2010 when a lower court’s dismissal of her claim was overturned.

Harris described the alleged breach of the implied terms of the employment contract as “scandalous and unconscionable conduct,” by the bank. He said a separate claim of sexual discrimination against the bank in another court was delayed until the resolution of yesterday’s case.

Adrian Huggins, the bank’s lawyer, had argued that those allegations should play no part in the current case.

“These are inflammatory issues whose purpose is to embarrass the bank and pressure us to pay her off, which we’re not going to do,” Huggins said.

Mark Tsang, a Hong Kong spokesman for the Charlotte, North Carolina-based bank, declined to comment on the case.

Judge Anthony To today rejected an application by Tadjudin to use documents her lawyer said would help rebut the bank’s assertions that she was a poor team player.

The case is Tadjudin Sunny v. Bank of America, National Association, HCA322/2008 in Hong Kong’s Court of First Instance. The discrimination case is DCEO4/2009 in Hong Kong District Court.