Paraphrased from numerous articles, two of which are cited below: Eric Ben-Artzi just turned down his share ($3 million) of a whistleblower award for reporting Deutsche Bank’s improper accounting internally and to regulators around the world, designed to inflate the value of Deutsche’s massive portfolio of credit derivatives during the financial crisis.
Mr. Ben-Artzi, a PhD in mathmatics and expert in valuations of derivatives, was fired from his position as a risk officer at Deutsche Bank because he raised an alarm over the bank’s inflated valuation of its portfolio of credit derivatives. He first reported the problem internally to Robert Rice, chief lawyer in charge of the investigation at Deutsche in 2011, who told him their conversations were locked up under “attorney-client” privilege. He disagreed. Rice then fired him, leaving him no choices other then to report the financial crimes directly to the SEC, or remain silent and abandon his professional, legal, and ethical responsibilities. Unlike the vast majority of other participants in financial management with direct knowledge of financial crimes, Mr Ben-Artzi chose to do the right thing. Two other Deutsche Bank employees also provided evidence to the SEC. His proper behavior of course has ended any hope of continuing his highly paid career on Wall Street. Mr. Ben-Artzi now works happily he says at a fintech startup in Israel.
Ben-Artzi is the first whistleblower to refuse such an award in the history of this program launched in 2011. He explains his decision as follows:
“Deutsche did not commit this wrongdoing. Deutsche was the victim – Meanwhile, top executives retired with multimillion-dollar bonuses based on the misrepresentation of the bank’s balance sheet. It is therefore especially disappointing that in 2015, after a lengthy investigation helped by multiple whistleblowers, the SEC imposed a fine on Deutsche’s shareholders instead of the managers responsible.” Ben-Artzi points out accepting his share of this settlement would amount to profiting from further punishment of the victims. He wants the top Deutsche executives that managed this crime to pay the SEC fine by having their bonuses clawed back, especially bonuses paid to the Deutsche lawyers revolving jobs between the SEC and Deutsche.
So why didn’t the SEC go after Deutsche’s executives? The most obvious and disgusting explanation is that Deutsche’s top lawyers “revolved” in and out of the SEC before, during and after the illegal activity at the bank. Robert Rice, who you will remember from above was the the chief lawyer in charge of the internal investigation at Deutsche in 2011, and the man who fired Ben-Artzi, became the SEC’s chief counsel in 2013. Robert Khuzami, Deutsche’s top lawyer in North America, became head of the SEC’s enforcement division after the financial crisis. Their boss, Richard Walker, the bank’s longtime general counsel (he left the bank this year) was once head of enforcement at the SEC.
Some of these SEC hires from Deutsche Bank and the investigation itself took place on the watch of Mary Jo White, the current chair of the SEC, whose relationship with Mr Khuzami and Mr Rice dates back 20 years. Mary Jo White thus bears ultimate responsibility at the SEC for the Deutsche investigation and settlement.
Andrew Ceresney, current director of the SEC’s Division of Enforcement recently stated “We will hold senior executives liable when they misstate the company’s performance and fail to come clean with shareholders.” Sounds great. In fact in at least one case it’s absolutely true. All the SEC now needs to do is explain why this very similar SEC enforcement action against the less connected executives of a smaller firm, Trinity Capital, and its subsidiary Los Alamos National Bank were targeted while, over the same period of time, executives at Deutsche were not. The violations at Trinity were very similar to those at Deutsche, but orders of magnitude smaller. Five executives at Trinity were charged, the chief executive settled and paid a fine, and litigation continues against two senior officers.
Many people working in finance think Eric Ben-Artzi is crazy. He is not an independently wealthy man. Why would he turn down a $3 million reward after his career was ruined? In his own words:
“People think if you give up your money, you’re either religious or crazy.” “This is the golden calf: people worshiping money above everything, people selling their values and ethics.”
Amen brother. We need many, many more people like you.