“I knew it was a big deal”

an interview with Eric Ben-Artzi

Taboo (Issue I/2021)

In 2010, you found out that your employer, Deutsche Bank, was manipulating their balances after the financial crisis of 2008. How did you feel when you discovered this?

It was shocking. It took me months to realise what's happening, though. What helped me understand was that I saw other risk officers who had flagged other issues. There seemed to be a governance issue, the risk department where I worked at was not running properly.

What exactly did you discover?

Imagine a used car dealership. The parking lot is full of used 20-year-old KIAs. Maybe they're worth 1,000 or 5,000 euros each - there can be legitimate disagreement about the value. But if the car dealership reports on its balance sheet that it has a parking lot full of new BMWs, that's fraud. That’s what Deutsche Bank did. They had one kind of derivative on their books and in fact it was a different one. It was a huge portfolio. This parking lot was the size of Canada, worth 130 billion dollars. They manipulated and cheated the market.

How did you reach the decision to flag this problem?

The more time passed on the more concerned I was. Being assigned to that portfolio, I didn't understand the scope of the problem and I was afraid I might be blamed. In 2011 there was Occupy Wall Street, people were demonstrating underneath the Deutsche Bank office. There is an atrium in the bottom of the building and during the time, people would hold these lectures about the financial system everywhere, in the streets and in other office buildings of financial institutions. This made it clear it wasn’t just an abstract issue. There were real people who cared about this and I felt I had a responsibility as well. It was professional pride and outrage that drove me to that decision.

Would you characterise this as a culture of silence that supported these manipulations?

In the months before I blew the whistle, I approached my colleagues and superiors. But in spring of 2011, when I figured that what was going on might be illegal, I called the internal hotline and the U.S. Securities and Exchange Commission (SEC), an agency that should protect investors and the banking system. The night before, my stomach hurt, I could not sleep. When I reached the internal legal department which was back then led by senior lawyer Robert Rice, he told me that there were other complaints and that he already had looked at “a million e-mails” about it. So, there were others who reported similar issues and by then, I knew it was a big deal. Yet, they merely called this issue political, meaning that it was about executives gaining more budget or power within the institution. This was just an excuse to silence my concerns.

Would you say that whistleblowers in general break taboos when they bring information to light like you did?

It depends on the circumstance. In the US, there are whistleblower laws that protect people who come forward. There are rewards, so whistleblowers have financial incentives. We want whistleblowers so that things improve that things get fixed. Right now, we have a system that makes whistleblowers come forward but the legal system isn't fixing anything, it's just churning more and more cases like mine.


There's a big industry within the US legal system that benefits from whistleblowing and fraud. Whistleblowers' lawyers and their friends on the other side both profit from it. When Deutsche Bank settled with the SEC in my case, the bank payed a fine of 55 Million Dollars. Underneath that, lawyers on both sides made a lot of money but no justice was served. The bank's executives betrayed the company and their shareholders and they walked off with their bonuses, in the end. The shareholders were the ones who paid the fine. This is absurd. Whistleblowers are expected to play along and not complain. I don't necessarily consider myself a Deutsche Bank whistleblower anymore because I laid bare the constant exchange of personnel between Deutsche Bank and the SEC as well as a problem in the US legal system.

How does this revolving door work between SEC and Deutsche Bank?

I think that Richard Walker, who was head of enforcement at SEC before he became Deutsche Bank's chief counsel in 2001, created this system of how both institutions profit from each other. In 2009, Robert Kuzami, his protegé, moved from chief counsel at Deutsche Bank to SEC. Robert Rice, who I originally flagged the fraud to at Deutsche Bank in 2011, was in charge of the investigation. He switched sides to the SEC in the middle of the ongoing case. Khuzami and Walker covered up other Deutsche Bank violations before as was alleged by whistleblower Darcy Flynn, a SEC lawyer in 2011.

That might seem fishy but it's not illegal, it's not a taboo at all to change positions between these institutions, right?

Yes, it's legal and people were aware of this exchange of positions between these institutions before. I just raised this awareness.

What were professional consequences for you?

Banks are closed to me but there are other opportunities I could pursue. What really destroyed me was court decisions that benefit lawyers rather than uphold the law. I have lost three cases in the past ten years. When I brought my whistleblower claim to the SEC in 2011, I was represented by a law firm which ended up suing me: Once the SEC declares a fine, whistleblowers are entitled to a share of this. In my case it was eight million dollars. I turned down the share because I thought the money should go to Deutsche Bank and their shareholders. My lawyers wanted to make me take the money by suing me in 2015. The law firm was afraid they would lose their cut that would be handed down to them from my reward. Between 2013 and 2016, I hired some experts who helped me with my case. They ended up suing me as well in when they saw an opportunity in 2018. They, too, feared for their cut. There are good laws in place to protect whistleblowers in the US but many of them do poorly because of this conduct.

You unveiled fraud but you also unveiled business secrets. Do you have a certain set of values that you followed when you flagged this wrongdoing within the bank?

I only exposed false accounting models to law enforcement authorities – it was not only my right, but my duty to share these. In some cases people were trying to label me as somebody with extraordinary ethics. But that's not true. I'm pretty average. It's a problem when we think that whistleblowers should be more ethical than other people because then we wouldn't have any whistleblowers. It's unfair, it's too heavy of a burden. What we really should ask for is a system, a structure, supporting people doing the right thing.

Interview by Fabian Ebeling

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