‘Project Teal’. Under this name, the investigation opened internally to know the details of the sales of complex derivative products to Spanish companies is known within the German bank Deutsche Bank, presumably bypassing the regulations for the commercialization of these products. The case was opened in January and the bank has had to extend the investigations beyond what was initially planned and more than fifty operations with companies in Spain and Portugal are being analyzed.
Deutsche Bank announces for this year the closure of offices and the dismissal of employees in Spain
The investigation was opened in January and has already cost two executives of the German entity, as reported by the Financial Times Y Bloomberg. Although initially it was a more limited issue after the case of the beverage company J- García-Carrión (Don Simón) became known, the entity had to open the focus and would already be analyzing the sales that some of its workers made to between 50 and 100 Spanish companies with highly speculative and complex products that were not designed for these types of customers.
To questions from elDiario.es, sources from the German bank have confirmed the existence of this investigation, although “it does not comment on specific matters.” “We have already stated that there is an ongoing investigation, and the scope of this investigation remains adequate,” add the aforementioned sources, who speak of seeking “confirmation of the facts and any possible similar activity.” “We do not intend to comment further until all elements of the investigation have been completed,” they settle.
Specifically, what the bank is investigating is the commercialization of certain operations with currencies in breach of European standards known as MiFid. These rules oblige investment banks to segment their products according to the client’s level of financial sophistication, being different if they are retail investors, experts or other financial entities, for example. Thus, in this case the managers of Deutsche Bank would have placed these products with non-specialized companies, the complexity of which far exceeded their knowledge. With these products, an alternative was offered to cover possible risks due to exposure to exchange rates in different countries. Some of them have reaped millionaire losses with these investments, although at the moment it is unknown how many of the fifty cases that are investigated have ended in a negative impact for the company. According to market sources, the affected companies would be mostly family businesses.
The bank therefore attempts to determine whether its employees knowingly and improperly sold these products. Also if, in addition to the initially known cases, it was a practice established for several years by some employees. As reported in January by the Financial Times, at the center of these practices, which would have lasted for several years and in more markets, was an employee who is no longer with the entity. As the months have passed, the scandal has grown in size and, according to the British newspaper, the departure of two executives last month would be linked to this case. They were Louise Kitchen, head of asset liquidation, and Jonathan Tinker, director of global currencies within Deutsche Bank.
The internal investigation, unveiled in January, has also been reported to supervisors BaFin and BCE. Although at the time it was assured that the investigations were reaching their end, it has been in recent weeks that it has been known that the case is broader than initially anticipated.
The main affected, as is known to date, by these operations is the company that owns Don Simón. The Murcian company, in fact, reached an agreement with the German entity with which the trial for these practices was avoided and for which J. García-Carrión received 10 million euros. The losses for the Spanish multinational food company would, however, have been significantly higher.
The case of J. García Carrión is even more complex, since it is not limited only to Deutsche Bank. The company, with a strong presence in the wine sector, has two other processes open with large investment banks for similar products that would have caused millions in losses. One of them is Goldman Sachs. The Murcian company has opened a legal proceeding with the US bank in the United Kingdom where it accuses it of selling “speculative derivatives unrelated to its business, with obscure implicit rates and without taking into account the relevant regulation.”
The other bank against which the company has initiated a claim It is with the French BNP Paribas. The Spanish company analyzed the operations carried out by the French bank and concluded that it would have caused 75 million euros of losses during five years, between 2015 and 2020.
Returning to the case of Deutsche Bank, the other victim who is known to date of possible irregular practices by workers of the German bank is the Palladium hotel group. The Balearic company, owned by former PP minister Abel Matutes and his family, confirms to this medium that it is in a “similar situation” to that of the food and beverage group. Although, it has not transcended what is the damage suffered by the hotel. Palladium notes that it is currently in a “prejudicial” situation in London. This open administrative channel could lead to an agreement like the one that García Carrión obtained with the German bank.
A complicated track record
The scandal of the sale of these products to Spanish companies affects the German bank after some convulsive years in which he has been involved in different irregular practices. Just a month ago, for example, he recognized an impact of 300 million euros on your results this year after being convicted of changing the fees on his checking accounts in Germany. A few weeks earlier, the German supervisor, BaFin, urged the bank to carry out greater control over money laundering operations, three years after being immersed in a scandal linked to Dankse Bank. Already before, the sales of speculative products linked to doubtful mortgages or million-dollar fines for manipulating interest rates splashed him during the last financial crisis.
This same year he was punished for the sale of complex financial products at the community level. In April, the bank was implicated together with Bank of America, Credit Suisse and Credit Agricole in a cartel in the debt bond market. The European Commission fined the entities 28 million euros, although the German bank got rid of the financial penalty for having been the one who revealed the existence of these anti-competitive practices. At first, it was vetoed from the placement of the first European Commission debt issue to finance the recovery plan after the pandemic. Weeks later he was pardoned and was able to participate in the second European debt issue.