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Deutsche Bank Executive Ignored Kickback Concerns, Vestia Says

Deutsche Bank Executive Ignored Kickback Concerns, Vestia Says

(Bloomberg) -- A lawyer for a Dutch housing firm said a Deutsche Bank AG executive “did nothing” about possible kickbacks to an official at the housing company, despite alarm bells that should have indicated “something suspicious” was going on.

Rhodri Davies, a lawyer for Stichting Vestia, made the comments to Claus Telaar, the bank’s relationship manager for the housing firm, as he cross-examined him at a London trial last week. Telaar immediately rejected Davies’ remarks.

The trial centers on 3.5 million euros ($4 million) in fees that Deutsche Bank paid a intermediary in the Netherlands. The bank says it believed those payments were legitimate fees for introducing clients and helping facilitate the trades, but Vestia argues the arrangement should have raised enough red flags for the bank to realize they were being used as kickbacks to an official at the affordable-housing provider.

The middleman, Arjan Greeven, told Dutch authorities that he shared the money with Marcel De Vries, Vestia’s treasury and control manager, who was in charge of its derivatives trading. Greeven was sentenced to 30 months in jail in July 2018 after being convicted of bribery and tax fraud. De Vries was convicted of bribery and sentenced to three years. Both men are appealing the cases in the Netherlands.

Vestia nearly collapsed as a result of derivatives losses totaling more than 2 billion euros, a substantial part of which came from trades that were handled by Deutsche Bank. In its suit, the housing association seeks to get back money it lost on 39 of the Deutsche Bank trades, saying the payments to De Vries tarnish the transactions.

Telaar, who heads the bank’s Dutch public-sector coverage, “failed to do something” even after three conversations that should’ve made him ask questions about the risk of kickbacks, Davies said at the trial last week.

“What I suggest to you is that you knew there was something suspicious going on here and you failed to do something about it and that was not honest,” he said. Telaar said he “totally” disagreed.

No one at Deutsche Bank knew about the improper payments to De Vries, the bank said in its filings for the case. “Vestia’s allegations are without basis and we deny them in the strongest terms,” a Deutsche Bank spokeswoman said. The bank said in its filings that Vestia’s bribery claims are “an opportunistic attempt to take advantage of Mr. de Vries’ corruption in an attempt to escape from the same 39 ‘loss-making’ transactions.”

Lawyers for De Vries and Greeven declined to immediately comment.

2008 Phone Call

During questioning last week, Davies said that a Deutsche Bank colleague had asked Telaar during a 2008 phone call whether there was an agreement between Greeven’s company, First in Finance Alternatives, and Vestia.

Telaar had told his colleague “you shouldn’t ask this,” according to a transcript of the conversation contained in Vestia’s court documents. Telaar said in court that he’d meant that the bank shouldn’t ask Greeven’s firm about fees it was getting from other banks.

In addition, Hakan Wohlin, a Deutsche Bank managing director, had raised the issue of “kickbacks” with Greeven during a 2009 meeting that Telaar attended, Davies said. Telaar told Davies this hadn’t made him suspicious because he’d understood Wohlin, who was “very strict,” was being “very diligent.”

He believed Wohlin was giving Greeven a general reminder that the bank doesn’t tolerate any misuse of funds, rather than specifically accusing him of misusing the money. Wohlin is scheduled to testify this week.

Third Conversation

The third occasion was a conversation Telaar had with an official at Waarborgfonds Sociale Woningbouw, which guarantees social housing associations’ debt, Davies said. The WSW official told Dutch investigators in 2012 that he’d spoken to Telaar about possible payments to De Vries, Davies said.

That conversation was “very general,” Telaar said, and he doesn’t remember it being about De Vries in particular. “There was nothing suspicious about the way he asked it,” Telaar said.

“Surely alarm bells should’ve started to ring by now?” Davies said. Telaar replied,“I didn’t suspect anything.”

The bank used intermediaries because it “did not have an established network in the Dutch social housing sector” and they helped make introductions to potential clients, Telaar, who isn’t a defendant in the case, said in his witness statement. “In addition to not knowing of any payments, I did not suspect that there had been any payments” by Greeven’s company to De Vries, the document said.

The case is Stichting Vestia v. Deutsche Bank Aktiengesellschaft, High Court of Justice, Case No. FL-2016-000018

To contact the reporter on this story: Kaye Wiggins in London at kwiggins4@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser

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