(Sept 9): Deutsche Bank AG, whose global operation is under the microscope of US lawmakers and criminal investigators, has enlisted an old friend of US Attorney General William Barr to help the bank navigate the political waters in Washington.
The decision came from Frankfurt, where the bank’s supervisory board led by chairman Paul Achleitner has retained Robert Kimmitt (pictured), according to people familiar with the matter. Kimmitt, 72, is a lawyer and former US ambassador to Germany whose friendship with Barr dates to the 1980s.
Kimmitt’s precise role isn’t clear even to many executives within the bank. The view from Frankfurt, some of the people said, is that the bank’s senior leadership brought him on earlier this year to bolster its presence in the US capital, where, in addition to the criminal inquiries, Democratic lawmakers are scrutinizing the bank’s relationship with one its highest-profile clients, President Donald Trump.
The view from the US side of the business has been murkier. When Kimmitt was hired, many top executives in the US weren’t immediately informed of his role, according to other people familiar with the matter. Lawyers representing the bank in US Justice Department investigations have been dealing directly with line prosecutors in several long-running investigations. In at least one of those investigations, the department has relayed almost no information in years, these people said.
Kimmitt, now a special counsel at WilmerHale, declined to comment through his firm. In a statement, the bank said, “The role of Robert Kimmitt is very clear: he has been retained by the Supervisory Board for his expertise but is not mandated to talk to any law enforcement agency and has confirmed that he has not done so.”
Still, some senior executives in Germany hope that Kimmitt’s longstanding relationship with Barr could help clear up a log-jam of Justice Department investigations, according to people familiar with the matter. Bank leaders are aware that if Trump is not re-elected in November, any settlement with a future Justice Department is likely to be tougher than what might be available this year, they said. Politically appointed prosecutors may also have incentive to wrap up the cases before they’re replaced, the people said.
Years of mounting legal problems have stunted Deutsche Bank’s shares. After the bank resolved several cases with regulators, its chief executive officer, Christian Sewing, promised to improve internal controls and regulatory compliance operations that failed to pick up suspicious activities. The bank has also said that it’s cooperating with ongoing investigations.
The bank is cooperating with a Justice Department investigation of Danske Bank A/S and Swedbank AB, both of which acknowledged compliance failures for serving as a conduit for tens of billions of dollars in suspicious transactions. Deutsche Bank, which handled the bulk of those transactions as a correspondent bank, paid New York banking regulators US$150 million for lax oversight.
The bank is also aiding US investigations into whether it played a role in a suspected conspiracy to rig the price of Treasury securities, and an inquiry into the bank’s hiring of people related to prominent foreign authorities including China, according to its most recent annual filing.
Another legal threat is a lengthy criminal probe into how wealthy Russians moved US$10 billion into the US financial system using so-called mirror trades in Moscow and London, most of it facilitated by Deutsche Bank. The bank has settled that matter with US and UK regulators and acknowledged compliance lapses, leaving the Justice Department’s inquiry hanging.
Kimmitt has close connections to both Deutsche Bank and the Justice Department. He and Achleitner have held senior positions in the American Council on Germany, a nonprofit founded after World War II to strengthen ties between the US and Germany. In 2017, Kimmitt emceed a special council dinner honouring Achleitner.
The friendship between Kimmitt and Barr dates goes back to the presidential campaign of the late George Bush in 1988, when they were responsible for vetting potential running mates for the vice president. More recently, Kimmitt remarked publicly that Barr had sought his counsel while deciding whether to run the Justice Department under Trump.
Since Sewing took over as CEO in 2018, legal provisions have declined considerably, even as a few new legal problems have arisen, including the one related to Danske. The lender’s shares have performed well relative to other European financials, having increased by about 15% compared with a decline of 36% for the Bloomberg Europe 500 Banks and Financial Services index.