aside The Connections Between Deutsche Bank, Russia And Our President, Part IV

Review regarding the smoke surrounding our republican President Donald Trump’s connections to Russia:

1.) Deutsche is our president’s largest creditor.

2.) Deutsche Bank has already been fined millions of dollars for laundering Russian dirty monies to the tune of $10 billion dollars via various methods and entities including the Bank of Cypress.

3.) The head of Deutsche Bank during this dark period, Josef Ackermann became the chairman of the Bank of Cypress in 2014.

Image result for PHOTO OF JOSEF ACKERMANN HEAD OF DEUTSCHE BANK
Josef Ackermann

4.) The largest shareholder of the Bank of Cypress, Dmitry Rybolovlev is the same Russian oligarch who purchased the president’s Palm Beach home in 2008 for the inflated price of $95 million to $100 million dollars when it was appraised for about $60 million dollars.

Image result for photos of Dmitry Rybolovlev5.) Around the time that the Russian oligarch Dmitry Rybolovlev purchased the president’s property in Palm Beach in 2008, the president was suing Deutsche Bank in 2008 over a $40 million loan that came due. He claimed that the 2008 downward spiral in property values, due to the US recession was as an “Act of God” which absolved him from having to honor this obligation. Somehow this whole incident was taken care of and Deutsche Bank has continued to loan the president monies.

6.) Coincidentally, the newly confirmed Commerce Secretary Wilbur Ross became the Vice Chairman of the Bank of Cypress in 2014. He has stepped down from this role.

7.) The Bank of Cypress has a lengthy history of laundering Russian dirty monies which has supposedly been corrected. However, a 2/2/17 EUobserver article by Andrew Rettman reports the following:

“Pieter Omtzigt, from the christian-democrat CDA party, put forward the criticism in a letter, on Saturday (January 30, 2017), to a financial crimes unit in The Council of Europe in Strasbourg.”

“Recent developments in Cyprus in relation to the Magnitsky case have shown the failure of Cyprus to apply money laundering legislation in practice,” he said.”

“This case is a litmus test for whether Cyprus is now really paying attention to proper controls or whether it is only paying lip service to recommendations.”

8.) And finally, the reason that the highly esteemed US prosecutor, Preet Bharara may have been recently fired by the White House could be because he had been in charge of pursuing legally the Deutsche Bank for its Russian money laundering schemes.

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Deutsche Bank Frankfort

The following are cliff level notes regarding Deutsche Bank.

On 8/29/16 Ed Caesar of the New Yorker penned the following detailed report on Deutsche Bank, “DEUTSCHE BANK’S $10-BILLION SCANDAL”

“Almost every weekday between the fall of 2011 and early 2015, a Russian broker named Igor Volkov called the equities desk of Deutsche Bank’s Moscow headquarters. Volkov would speak to a sales trader—often, a young woman named Dina Maksutova—and ask her to place two trades simultaneously. In one, he would use Russian rubles to buy a blue-chip Russian stock, such as Lukoil, for a Russian company that he represented. Usually, the order was for about ten million dollars’ worth of the stock. In the second trade, Volkov—acting on behalf of a different company, which typically was registered in an offshore territory, such as the British Virgin Islands—would sell the same Russian stock, in the same quantity, in London, in exchange for dollars, pounds, or euros. Both the Russian company and the offshore company had the same owner. Deutsche Bank was helping the client to buy and sell to himself.

Image result for photos of Igor Volkov of deutsche bank
Igor Volkov

At first glance, the trades appeared banal, even pointless. Deutsche Bank earned a small commission for executing the buy and sell orders, but in financial terms the clients finished roughly where they began. To inspect the trades individually, however, was like standing too close to an Impressionist painting—you saw the brushstrokes and missed the lilies. These transactions had nothing to do with pursuing profit. They were a way to expatriate money. Because the Russian company and the offshore company both belonged to the same owner, these ordinary-seeming trades had an alchemical purpose: to turn rubles that were stuck in Russia into dollars stashed outside Russia. On the Moscow markets, this sleight of hand had a nickname: konvert, which means “envelope” and echoes the English verb “convert.” In the English-language media, the scheme has become known as “mirror trading.”

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Birmingham

“Mirror trades are not inherently illegal. The purpose of an equities desk at an investment bank is to help approved clients buy and sell stock, and there could be legitimate reasons for making a simultaneous trade. A client might want to benefit, say, from the difference between the local and the foreign price of a stock. Indeed, because the individual transactions involved in mirror trades did not directly contravene any regulations, some employees who worked at Deutsche Bank’s Russian headquarters at the time deny that such activity was improper. (Fourteen former and current employees of Deutsche Bank in Moscow spoke to me about the mirror trades, as did several people involved with the clients. Most of them asked not to be named, either because they had signed nondisclosure agreements or because they still work in banking.)”

“Viewed with detachment, however, repeated mirror trades suggest a sustained plot to shift and hide money of possibly dubious origin. Deutsche Bank’s actions are now under investigation by the U.S. Department of Justice, the New York State Department of Financial Services, and financial regulators in the U.K. and in Germany. In an internal report, Deutsche Bank has admitted that, until April, 2015, when three members of its Russian equities desk were suspended for their role in the mirror trades, about ten billion dollars was spirited out of Russia through the scheme. The lingering question is whose money was moved, and why.”

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Bremen

“Deutsche Bank is an unwieldy institution with headquarters in Frankfurt and about a hundred thousand employees in seventy countries. When it was founded, in 1870, its stated purpose was to facilitate trade between Germany and other countries. It soon established footholds in Shanghai, London, and Buenos Aires. In 1881, the bank arrived in Russia, financing railways commissioned by Alexander III. It has operated there ever since.”

“In 2007, the bank’s share price hit an all-time peak: a hundred and fifty-nine dollars. But as it grew fast it also grew loose. Before the housing market collapsed in the United States, in 2008, sparking a global financial crisis, Deutsche Bank created about thirty-two billion dollars’ worth of collateralized debt obligations, which helped to inflate the housing bubble. In 2010, Deutsche Bank’s own staff accused it of having masked twelve billion dollars’ worth of losses. Eric Ben-Artzi, a former risk analyst, was one of three whistle-blowers. He told the Securities and Exchange Commission that, had the bank’s true financial health been known in 2008, it might have folded, as Lehman Brothers had. Last year, Deutsche Bank paid the S.E.C. a fifty-five-million-dollar fine but admitted no wrongdoing. Ben-Artzi told me that bank executives had incurred a tiny penalty for a huge crime. “There was cultural criminality,” he said. “Deutsche Bank was structurally designed by management to allow corrupt individuals to commit fraud.”

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Eric Ben-Artzi

“Scandals have proliferated at Deutsche Bank. Since 2008, it has paid more than nine billion dollars in fines and settlements for such improprieties as conspiring to manipulate the price of gold and silver, defrauding mortgage companies, and violating U.S. sanctions by trading in Iran, Syria, Libya, Myanmar, and Sudan. Last year, Deutsche Bank was ordered to pay regulators in the U.S. and the U.K. two and a half billion dollars, and to dismiss seven employees, for its role in manipulating the London Interbank Offered Rate, or libor, which is the interest rate banks charge one another.”

“In April, 2015, the mirror-trades scheme unravelled. After a two-month internal investigation, the three Deutsche Bank employees were suspended. One was Tim Wiswell, a thirty-seven-year-old American who was then the head of Russian equities at the bank. The others were Russian sales traders on the equities desk: Dina Maksutova and Georgiy Buznik. Afterward, Bloomberg News suggested that some of the money diverted through mirror trades belonged to Igor Putin, a cousin of the Russian President, and to Arkady and Boris Rotenberg. The Rotenberg brothers own Russia’s largest construction company, S.G.M., and are old friends of Vladimir Putin. They are on the U.S. government’s list of sanctioned Russians, which was compiled in response to Putin’s aggression in Ukraine. According to the U.S. Treasury, the Rotenbergs have “made billions of dollars in contracts” that were awarded to their company by the Russian state, often without a transparent bidding process. (Last year, S.G.M. was awarded a contract worth $5.8 billion to build a twelve-mile bridge between Russia and Crimea.)”

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Tim Wiswell

“In June, 2015, with pressure from shareholders intensifying over the mirror trades and other scandals, the co-C.E.O.s of Deutsche Bank, Anshu Jain and Jürgen Fitschen, announced that they would resign. They were replaced by John Cryan, whose remit was to clean up the bank. That September, he announced the impending close of all investment-banking activity in Russia. When the Moscow investment bank shut down, in March, the remaining employees threw a “going out of business” dinner at a restaurant near the office. By the end of the evening, bankers were dancing on the bar.”

“Many current and former employees of Deutsche Bank cannot quite comprehend how the equities desk in a minor financial outpost came to taint the entire institution. The ostensible function of the Moscow desk was straightforward: it bought and sold stock for approved corporate clients—mutual funds, brokerages, hedge funds, and the like. The desk had about twenty employees, and included researchers, who analyzed financial data; sales traders, who took calls from clients about buy and sell orders; and traders, who executed the orders.”

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Wall Street

“According to a former employee, before the crash of 2008 the desk’s yearly profit was nearly three hundred million dollars. In the years after the crash, profits plunged by more than half. In this environment of diminishing returns on normal stock-market activity, the Moscow equities desk was looking to find fresh revenue streams.”

“Many businesses in the Russian Federation avoid taxes by using offshore jurisdictions, such as Cyprus, for their headquarters. Rich Russians, meanwhile, often funnel their private fortunes offshore, in an effort to hide their assets from the capricious and predatory Russian state. Frequently, this fugitive money is invested in assets such as property: on Park Lane in London, or Park Avenue in New York. (Boris Rotenberg’s wife, Karina, told the Russian edition of Tatler that the family has three main houses: one in Moscow, one in Monaco, and a “dacha” in Provence, where she keeps her horses.)”

Russian President President Vladimir Putin (AP Photo/Andrew Harnik)

“The impact of this capital flight is felt at both ends of its journey. Research published last year by Deutsche Bank’s own analysts suggested that unrecorded capital inflows from Russia into the U.K. correlated strongly with increases in U.K. house prices and, to a lesser extent, with a strengthening of the pound sterling. Capital flight also has weakened Russia’s tax base and its currency. In 2012, Putin began a “de-offshorization” program, urging businesses and oligarchs to keep their headquarters and their fortunes at home. Two years later, after Russia’s incursion into Crimea led to sanctions from the European Union and the U.S., Putin declared that offshorization was illegal. But as the ruble and the economy foundered many Russians felt even more eager to remove their money. Mirror trading was an ideal escape tunnel.”

Related image“According to people with knowledge of how mirror trades worked at Deutsche Bank, the main clients who were engaged in the scheme came to the bank in 2011 through Sergey Suverov, a sales researcher. Suverov left the bank soon afterward. (He has not been charged with wrongdoing.) Igor Volkov, the Russian broker, became the clients’ primary representative. Initially, the accounts that Volkov handled—funds based in Russia and overseas, with such bland names as Westminster, Chadborg, Cherryfield, Financial Bridge, and Lotus—placed conventional stock-market orders. But Volkov soon made it clear to his contacts at Deutsche Bank that he wanted to make a large volume of simultaneous trades.”

“What did Deutsche Bank know about the companies that Volkov represented? Each new fund that wished to trade with Deutsche Bank, known as a “counterparty,” was subjected to a “double check” by compliance departments in London and Moscow, to insure that papers were in order. Evidently, all the counter-parties passed both internal reviews. The bank was also required to complete a “know your client,” or “K.Y.C.,” assessment, and determine if the client had any taint of criminality. Deutsche Bank did little to interrogate the source of funds—including those behind Westminster and other Volkov clients.”

Image result for photos of Eric Ben-Artzi,“The Russian equities desk generally had four sales traders who took calls from clients. Two were American, and two—Maksutova and Buznik—were Russian. The sales traders reported to Tim Wiswell, the American in charge of the Russian equities team, and to Carl Hayes, an executive in London. Two other managers—Batubay Ozkan, in Moscow, and Max Koep, in London—oversaw the desk.”

“Maksutova and Buznik were allocated the equities desk’s Russian clients. Maksutova was assigned the clients represented by Volkov. Colleagues say that she knew few personal details about Volkov.”

Image result for photos of Tim Wiswell“In 2009, top managers at Antanta Kapital formed Westminster Capital Management, which became one of the first major mirror-trade clients. As a Deutsche Bank employee put it, Volkov was Westminster’s “execution guy.” Volkov also began executing mirror trades for several other companies.”

“Four employees at Deutsche Bank in Moscow recall that nobody tried to hide the scheme. Wiswell, Buznik, and Maksutova all met with Volkov, and his orders were discussed openly on the desk. Colleagues also remember that Hayes asked both Buznik and Wiswell about the mirror trades. Few conversations relating to the trades, however, were likely retained by Deutsche Bank’s internal monitoring systems. Within the office, conversations about the trades typically occurred face to face, and videoconferences with colleagues in London were not recorded.”

Image result for photos of Eric Ben-Artzi,“Several Deutsche Bank employees in London knew about the mirror trades, even though the orders were taken in Moscow. The London office executed half the transactions. The trades were also documented by a computer system, called DB Cat, which catalogued every trade made by the bank. Hayes and Koep, the supervisors in London, could call up trading receipts on their computers.”

“Although many people at Deutsche Bank knew about the mirror trades, not everybody was happy about them. In late 2012, Maksutova, the sales trader, went on maternity leave, and Buznik temporarily worked with Volkov. Buznik became uneasy that Volkov was executing identical buy and sell orders, and twice asked to meet with Wiswell to discuss the propriety of mirror trading. Wiswell, colleagues say, looked after Volkov’s accounts personally. Wiswell assured Buznik that the trades were legitimate, and Buznik did not share his concerns with other managers.

Image result for photos of deutsche bank buildings“The apparent willingness of counterparties to lose money again and again, a former manager at Deutsche Bank told me, should have “sounded an air-raid alarm” that the true purpose of the mirror trades was to facilitate capital flight.”

Link for entire report: Deutsche Bank’s $10-Billion Scandal – The New Yorker www.newyorker.com/magazine/2016/08/29/deutsche-banks-10-billion-scandal Aug 29, 2016 –

 

12 comments

  1. Dear Roger Williams,

    Eventually, we will get there.There is too much effort by the WH to distract from this story, that this is where there is the real problems are.

    Ciao, Gronda

  2. While it seems to have taken place much earlier than what we are now looking at, I can’t help to think there is some connection between this and the relationship between Bayrock Group and tRump! The one thing that keeps sticking in my mind is the continued relationship between tRump and the bank after he basically defaulted on loans in the housing crisis. No banker, under normal circumstances would have continued to have financial dealings with him after that fiasco, and it defies normal business ethics that they would have done so.
    If one were to step back and take an objective look at King tRumps business dealings starting from day one and continuing until this very day, there are so many red flags of questionable (to put it mildly) business ethics and possibly criminal acts that indicates that some powerful forces were working behind the scene in his favor. IMO, one of the major reasons this man has such a huge ego and acts as if he were King is because he has been able to escape the legal process that the rest of us would have faced long ago. The question of who stands behind the curtain and is actually pulling the strings on the King tRump puppet is becoming more obvious as more and more is revealed. If I were King tRump, I would be hiring a food taster, and sleep very little, because the people he is working for are much more dangerous than I think he realizes and they leave behind no witnesses in the process…

    • Dear Crustyolemothman,

      You are so right.

      Under any normal circumstanced, there is no way that a bank would continue to do business with a client who brought a suit against it. This is what makes the dealings between DT and Deutsche Bank around 2008 a piece of the puzzle that requires further investigation.

      As I mentioned to Keith, it is just too much of a coincidence that the Russian Oligarch overpaid on DT’s Palm Beach, FL. home in 2008 around the same amount of $40 million dollars which DT owed Deutsche Bank.in 2008.

      Ciao, Gronda.

      • While I may possibly be 1000% wrong, but I have suspicions that the connection to the Russian mob goes all the way back to the days of Fred Trump and the King piggy backed off his connections to make it this far up the ladder of corruption. Oh well, perhaps the truth will surface prior to the total collapse of this nation, or the pending war with Korea that King tRump will start to force the focus away from his illegal and immoral actions..

  3. Gronda, this is excellent. Thanks for reporting on this. I think Senator John McCain’s use of the analogy of “another shoe dropping on a centipede” is apt. There is much more to this story that the President would not like exposed. I was tickled by his chutzpah of “the act of God” claim so as not to pay a loan. You may recall, this real estate tycoon decided to start a mortgage company in the middle of the housing crisis and was surprised it failed. Keith

    • Dear Keith,

      Yes, the shoes keep dropping.

      DT’s deciding to sue Deutsche Bank was his way of delaying having to pay up, And yes, it took chutzpah on his part. But now that we have gotten to know him, we see that this was his SOP.

      It is just an amazing coincidence that the Russian Oligarch overpaid on DT’s Palm Beach, FL. home in 2008 around the same amount of DT’S loan for $40 million dollars came due in 2008 by Deutsche Bank.

      What Deutsche Bank got away with for so many years gives impetus to the saying, reality is stranger than fiction.
      .
      Ciao, Gronda

      • Gronda, this man is going to take us down a rabbit hole stranger than anything Lewis Carroll could ever imagine. One of the things I fear is he will so harmful to our reputation in the world, it will take decades to recover from. That plus hamstringing our environmental progress. Keith

    • Dear Michal Estok,

      Welcome! Deutsche Bank is the poster example of why there needs to be some bank regulations and oversight. I did take time to read your post which is excellent.I love your blog. Thanks for sharing.

      Thanks for stopping by, Gronda

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