Would you turn down an award for upholding ethics? Eric Ben-Artzi did
Former VP Risk Management at Deutsche Bank, the world’s 2nd largest interbank FX dealer by order flow, blew the whistle on the misvaluation of a large derivatives position and the ‘revolving door’ nature of SEC officials and Deutsche Bank executives. He refused to accept a financial reward for his efforts.
Eric Ben-Artzi, a former Risk Officer at Deutsche Bank, the second largest interbank FX dealer by global order flow, with 14.54% of the world’s market share during 2015, has proven that ethics most certainly are alive and well among employees in positions of responsibility within the large institutions.
Mr. Ben-Artzi was offered a $16.5 million award for providing critical information to the Securities and Exchange Commission (SEC) in America whcih assisted the authorities in fining the German company $55 million last year.
As a result of Mr. Ben-Artzi’s information, the SEC had been able to conclude that Deutsche Bank had misstated its accounts during the 2008/9 financial crisis by improperly valuing a giant derivatives position.
This particular incorrect valuation of a derivatives position by Deutsche Bank became a very significant and newsworthy incident, however Mr. Ben-Artzi was not impressed at all at this conduct and decided to blow the whistle.
Mr. Ben-Artzi, who holds a PhD from New York University and began his career as a Strategist at Goldman Sachs in 2007 before moving to Deutsche Bank in 2010, where he spent a year as VP Risk Management before leaving to join BondIT Ltd as Vice President, disapproves of the ‘revolving door’ nature of senior personnel between the SEC and Deutsche Bank, citing it as a massively contributing factor as to why executives remain unpunished for nefarious actions.
Mr. Ben-Artzi said “This goes beyond the typical revolving-door story. In this case, top SEC lawyers had held senior posts at the bank, moving in and out of top positions at the SEC even as the investigations into malfeasance at Deutsche Bank were ongoing.”
Back in 2011, during Mr. Ben-Artzi’s tenure at Deutsche Bank, he explained that Deutsche Bank’s lawyer in charge of the internal investigation of Deutsche Bank during the time of Mr. Ben-Artzi’s tenure, was Robert Rice, who was made Chief Counsel to the SEC in 2013.
Additionally, Robert Khuzami, Deutsche Bank’s leading lawyer for North America joined the SEC’s enforcement division in approximately the last quarter of 2009, and Richard Walker, Deutsche Bank’s General Counsel who moved on from the company this year, had previously held the position of Head of Enforcement at the SEC.
Mr. Ben-Artzi was not afraid to speak out publicly about what he viewed as a misuse of the old school tie network.
He spoke out by writing an opinion in the Financial Times stating “We must protect shareholders from executive wrongdoing”, Ben-Artzi wrote: “Deutsche did not commit this wrongdoing. Deutsche was the victim. To be precise, the bank’s shareholders and its rank-and-file employees who are now losing their jobs in droves are the primary victims.”
Mr. Ben-Artzi continued to state publicly “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.”
Mr. Ben-Artzi was one of three whistleblowers in 2010 and 2011 who reported improper accounting internally and to regulators internationally.
In a remarkable display of commercial and personal ethics, Mr. Ben-Artzi initially refused to accept any money at all from the authorities for this.
Unfortunately, he was not able to reject parts of his award — accounting for the majority of the $8.25m — that were claimed by his ex-wife, lawyer or outside experts who worked on his submissions to the SEC.