Fired Deutsche Bank Manager Claims Superiors Approved Deal Listsby
Morton has sued bank for $17 million saying dismissal unfair
Dispute stems from payments made to Chinese joint venture
A former Deutsche Bank AG executive who’s suing the firm for unfair dismissal is arguing in court that the payments to a Chinese joint venture which got him fired were based on approvals by other top managers in Asia.
Douglas Morton, who was a managing director in Hong Kong, has alleged in the city’s High Court that senior executives including the co-head of the Asian corporate banking and securities unit at the time approved two lists of deals that formed the basis for revenue sharing payments made to Zhong De Securities Co. in 2013 and 2015, his lawyer at Robertsons Solicitors said.
Morton, 52, is seeking HK$135.3 million ($17 million) for unfair dismissal in a claim filed with Hong Kong’s labor tribunal in April. He has also filed a separate suit against Deutsche Bank seeking a declaration that he didn’t act improperly in signing off on the payments to Zhong De. Morton, a former co-head of Asia corporate finance, was fired for negligence because of his involvement in two deal lists which allegedly contained false information, according to internal bank documents seen by Bloomberg.
At issue is whether Morton was unfairly singled out over payments totaling 4.6 million euros ($5.1 million) to Zhong De. Morton alleges the transfers partly stemmed from efforts by senior Deutsche Bank management to keep the joint venture from posting losses for 2012 and 2014, his lawyer said. An internal Deutsche Bank investigation revealed that Zhong De was compensated for at least one transaction it didn’t work on, people familiar with the matter told Bloomberg last year.
“The information provided to Bloomberg is factually incorrect in multiple respects, is out of context and appears to be provided by a source with either little knowledge of the matter or with a vested interest," said Michael West, a spokesman for Deutsche Bank in Hong Kong. “Deutsche Bank has no further comment as this matter is before the court where the bank has rejected Mr Morton’s claims and is vigorously contesting them.”
Jiang Peixing, chief executive officer of Zhong De, said by phone that the venture was only compensated for deals it worked on and denied that the payments were made to help it break even. He declined to comment further.
Morton claims executives including Michael Ormaechea, who is now head of Global Markets for the Asia-Pacific region, and Michael Connolly, currently the unit’s chief operating officer, were involved in approving the lists of transactions that Zhong De got compensated for, his lawyer said. Morton also claims he wasn’t involved in picking the deals that got included, although he was copied on emails that outlined the lists and signed off on the payments, according to the lawyer.
West said the Deutsche Bank executives had no comment.
Foreign investment banks are required to set up joint ventures with local partners to provide services such as underwriting initial public offerings in China. They can only hold minority shares in the ventures, preventing them from wielding full control. Deutsche Bank agreed to buy a 33 percent stake in Zhong De in 2008. The local government of Shanxi province owns the rest.
The lists of transactions Zhong De was compensated for were compiled in late 2012 and 2014, and payments were made early in each of the following years, the lawyer said. Zhong De posted profits in 2012 and last year and reported losses in 2013 and 2014. Foreign-backed securities ventures must post consecutive annual profits before they can apply for licenses to offer additional services.
Zhong De has licenses for issuing equity and debt in China, and also provides mergers advisory.
Morton also alleges that Larry Chi, who at the time was head of corporate banking and securities for China, was among those who signed off on the 2014 list, the lawyer said. Chi is now chairman of client coverage for China.
In November 2014, Zhong De informed Deutsche Bank that it would need 27 million yuan, or 3.6 million euros at the time, to avoid posting a loss for the full year and to be fairly compensated, according to Morton’s lawyer. Deutsche Bank executives then compiled a list of deals for revenue sharing with the venture, Morton alleges according to his lawyer. Morton claims the Deutsche Bank managers stressed the need for Zhong De to break even so it could apply for additional licenses, the lawyer said.
Following a suggestion by Ormaechea, two deals that were done the previous year were included in the 2014 list of transactions for revenue sharing, even though Deutsche Bank had already closed the books for 2013, Morton alleges according to his lawyer.
Separate conversations about compensating Zhong De took place in late 2012, when the venture was on the verge of posting a loss, Morton claims according to his lawyer. Deutsche Bank paid the venture the equivalent of 1 million euros in January 2013, the lawyer said. Morton was on vacation when both lists were drawn up and finalized, according to his lawyer.
Zhong De reported a 4.8 million yuan profit in 2012. For 2014, it had a 17.4 million yuan loss.
Deutsche Bank placed Morton on leave in May 2015 as it investigated the payments to Zhong De. An internal disciplinary hearing in October concluded there was no proof that Morton knew the 2014 deal list contained misleading information, according to documents seen by Bloomberg. The bank still determined that he had been negligent, and he was fired in November, the documents show.