Around the time of Broeksmit’s death, a small lender in Cyprus, Hellenic Bank, got suspicious. Someone from Russia had set up accounts with Hellenic, and obscene sums of money were pouring in.
That strange things were happening in Cyprus was not a shock. The island was a popular place for people with shady backgrounds to do their banking. Cyprus was part of both the European Union and the euro currency area, where government regulations were robust, so in theory, at least, Cyprus’s financial system was safer than in many other parts of the world. Yet the country also tended to do the absolute minimum when it came to blocking illicit transactions. By design, that made it a go-to destination for Russians and others searching for somewhere to hide ill-gotten cash. Aside from its sunny weather, the laxity of its financial system and its integration into Europe were perhaps Cyprus’s biggest selling points.
It took a lot to make a Cypriot banker queasy, but nearly $700 million had flooded into these particular Russian bank accounts in a short period of time, and that did the trick. Officials at Hellenic looked into where the money was coming from—a basic first step when conducting due diligence on such gigantic money flows—and saw that the source was Deutsche Bank. This should have been a reassuring sign. For all its problems, Deutsche was a mainstream, heavily regulated European financial institution—not the kind of dodgy outfit likely to be involved in brazen money laundering.
But there was a protocol for Hellenic to follow in such situations, and it called for the filing of a “request for assistance” with Deutsche in order to get more information on the unusual wire transfers. That request was submitted to Deutsche’s London office, where the transactions had originated, in January 2014. It asked Deutsche to explain its relationship with the Russian customer and the purpose of the transfers, as well as whether Deutsche had “any reason to believe that the transactions . . . are in any way of a suspicious nature.” Deutsche probably could have put the matter to rest with a quick response, but instead it ignored the query. The next month, Hellenic sent a reminder. That, too, received no answer. A third inquiry followed in March. This time, the request was routed to a different part of Deutsche, and someone there directed it to another office, and that office in turn forwarded it on to Tim Wiswell in Moscow.
Wiz knew all about these transactions. The Russian customer was participating in mirror trades with Deutsche to extract rubles from Russia and convert them into dollars, using Deutsche’s U.S. operations—DBTCA—as a Laundromat. Then the dollars were being zapped over to Cyprus, where the Russian beneficiary could do with the money as he pleased—except for the fact that Hellenic had now grown suspicious. Wiz needed to quell the concerns; otherwise Deutsche and its client would have to find another, less scrupulous destination for the freshly laundered funds. Wiz assured Hellenic that Deutsche had thoroughly vetted the customer and saw “no reason for concern here.”
Hellenic, however, was not satisfied. Apparently realizing that the money was being routed through the United States, which had a reputation for imposing crippling penalties on institutions that violated American law, it sent a final inquiry. This one went to a DBTCA employee in New York who was in charge of protecting against financial crime inside the bank. As Broeksmit had warned months earlier, DBTCA was so short-staffed that it didn’t have its own chief financial officer or compliance team. And sure enough, the internal cop never responded or looked into the matter. He would later explain to regulators that he had been too busy and “had to deal with many things and had to prioritize.”
It wouldn’t be until October 2014—after prodding from the Kremlin, which was trying to halt an exodus of cash from the country—that Deutsche’s headquarters would realize that there was a massive Russian money-laundering scheme operating out of its Moscow outpost, with a helping hand, perhaps unwitting, from the bank’s London and New York offices. A year after Hellenic Bank had first flagged the suspicious transactions, Deutsche alerted regulators in multiple countries to what it had uncovered. Government investigations were launched in the United States and Britain, and they eventually would find that Wiz’s wife had offshore bank accounts with what looked like millions of dollars she had received from Russians, at least some of which had originated with the bank’s mirror-trading clients and paid to her via DBTCA. (Wiz also sometimes received bags of cash.) Broeksmit’s concerns about DBTCA’s laxity were proving prescient.
For the better part of a year, Anshu had been publicly insisting that Deutsche had more than enough capital to protect it in the event of another financial crash. Few investors or regulators believed him, partly because the bank’s shock absorbers were thinner than those of its peers and partly because the bank was still loaded with trillions of dollars of derivatives, which could go from valuable to valueless in a heartbeat. The drip-drip-drip of bad news and the constantly sinking stock price had made Deutsche’s clients increasingly nervous, too. Banks rely on the faith of customers, investors, regulators, and other banks—otherwise everyone will pull their money out and the institution will quickly capsize—so this was a perilous situation.
While Jain projected confidence in public, he and his lieutenants acknowledged privately that they had a problem on their hands. Numbers didn’t lie, and the bank’s stock price was in the gutter; the market clearly lacked confidence in the bank’s future. Anshu had a preferred solution to this mess: He wanted to get rid of Deutsche’s retail-banking business in Germany. The country was notorious for having far too many banks with far too many branches (Deutsche itself had well over a thousand, thanks in part to Ackermann’s acquisition of Postbank), and the competition drove profits into the ground. This was great for consumers, but not so great for bankers. Jain told Paul Achleitner, the chairman of the supervisory board, that they should jettison the business and return to Deutsche’s old model. After all, in its original incarnation, the bank hadn’t bothered with small-time retail customers, focusing instead on German exporters and multinational companies. “It’s not in our DNA,” Henry Ritchotte, still the bank’s chief operating officer, explained to board members, hoping to win them over to this radical idea. But the plan was stillborn. There was no way Achleitner or the rest of Deutsche’s board—stocked with labor representatives who were obligated to act on behalf of the bank’s rank-and-file German employees—were going to bless a proposal that would result in many of those employees losing their jobs. Anshu’s inner circle would later lament that they hadn’t just announced their idea to the public unilaterally; that would have made it much harder for Achleitner and his boardroom colleagues to stand in their way.
Jain felt like everyone at Deutsche knew that he’d been thwarted. He thought a substantial majority of the bank’s 100,000-plus employees hated him—whether because of his brown skin and inability to speak German, or because his preferred corporate strategy would have cost many of them their jobs. Geetika was sick of watching her husband being publicly pummeled and spending his evenings lamenting his failings; she urged him to quit. In March 2014, Anshu spent the long flight back to Europe from a Singapore business trip weighing his options. By the time the plane touched down in Frankfurt, he had made up his mind. He took Achleitner out to dinner and told the chairman that he had underestimated how hard this job would be and how little support he could count on from the bank’s supervisory board and employees. Jain doubted the bank’s current strategy would succeed. He thought he should resign.
Achleitner wasn’t thrilled with Jain’s performance thus far, but he knew that his abrupt departure could spark a devastating crisis of confidence. The chairman had long sensed in Anshu a deep well of insecurity, and so he pledged his support and begged him to stay. Jain, calmed by these reassurances, agreed to remain as co-CEO.
Bucked up with new confidence, Jain realized the time had come for the bank to start taking its medicine. In May 2014, he announced that Deutsche would issue eight billion euros (about $11 billion) worth of new shares. The infusion gave Deutsche a little breathing room, and Jain decided to use some of the outside money to accelerate growth in the United States and elsewhere. Some of Deutsche’s board members questioned this decision, arguing to Jain and Achleitner that the money should be used to insulate the bank from future storms. The two men waved off such conservatism. Jain’s plan was for Deutsche to be the only “universal bank” headquartered in Europe—a distinction that he believed would win it lots of business from European clients as well as overseas companies trying to do business on the continent. And so, while other crisis-scarred banks retreated, Deutsche cruised in the opposite direction. It was another big mistake.
All the while, government investigations into the bank were accelerating, and the cases threatened to become more than public embarrassments. Regulators and prosecutors, sick of being ridiculed as toothless (years of pip-squeak penalties having had no discernible effect on banks’ conduct), were beginning to impose larger and larger fines on badly behaved banks. Fines of $10 billion or more were no longer out of the question. A penalty of that size was enough to wipe out nearly all of the capital that Deutsche had just raised.
The soon-to-be-launched investigations into Wiz’s Russian money laundering were just one item on a growing list of threats. (Deutsche still hadn’t discovered the separate Laundromat operation that predated the mirror-trading scheme.) In New York, regulators were finishing up a damning investigation into how the bank deliberately violated international sanctions by doing business with entities in Iran, Syria, Burma, Libya, and Sudan. (In 2015, the New York Department of Financial Services would fine Deutsche $258 million, require it to fire employees, and install an independent monitor inside the bank to try to prevent it from committing more crimes.)
In the Libor case, prosecutors and regulators in at least three countries had concluded that Deutsche was one of the worst offenders, with responsibility for the scandal up and down the corporate ladder. Penalties would surely stretch into the billions.
And in Washington, Bob Roach’s Senate committee had just finished its tax-avoidance investigation, and the result was a scathing report spelling out how Deutsche had enabled giant hedge funds like Renaissance Technologies to avoid billions of dollars in federal taxes. Shortly before the report was published, the Broeksmit family got an unsettling heads-up from the bank: Bill might be mentioned in an unfavorable light. The moment the report was posted online, Val searched the document, and sure enough, his father was named eight times in the ninety-six-page report. The cameos were brief but important. Back in 2008, as Deutsche’s lucrative work with Renaissance had intensified, Jain had dispatched Broeksmit to make sure everything was kosher. Bill had spent weeks trying to understand the byzantine structure that Deutsche’s traders had erected for the hedge fund. He had eventually concluded that aside from some mild objections about the structures consuming too much of the bank’s financial resources, there was nothing fundamentally wrong with the way the trades were being handled. But in a phone call with a colleague, Satish Ramakrishna, Broeksmit had been candid about the fact that the transactions were designed “for tax reasons.” The bank recorded all calls over its phone systems, and this one was eventually discovered in the files that the Senate subpoenaed from Deutsche. This was a problem. The bank’s defense was that the Renaissance trades had legitimate business purposes and weren’t designed purely to avoid taxes. A couple of senior executives had prepared extensive Senate testimony that was devoted largely to exhibiting those supposed non-tax rationales. But here was Broeksmit openly declaring what everyone knew but no one else had been honest or naive enough to say aloud.
Months before his death, Broeksmit had learned that Senate investigators were homing in on this recorded conversation. One late summer afternoon in 2013, attorneys from the law firm Paul, Weiss, Rifkind, Wharton & Garrison had been in London to interview him about the Renaissance trades. The goal of the meeting was to figure out what Bill knew and to get his take on the documents and recordings that the Senate investigators had obtained. The men sat at a wooden table so polished that Broeksmit could see his reflection in it. The lawyers told him that there was a chance he would have to go to Washington to be interviewed on Capitol Hill, perhaps under oath. Broeksmit was polite and forthcoming, but he struck the legal team as beaten down and world-weary. After the meeting, as the attorneys were in a Heathrow lounge awaiting their flight back to New York, Bill phoned one of them. He peppered the lawyer with questions about what he needed to do next. The way Broeksmit talked, he seemed to be bracing for a world of shit to land on him at any moment.
The Senate’s report was unveiled with fanfare in July 2014, paired with congressional hearings—just as the co-head of Renaissance, Robert Mercer, was beginning to bankroll a series of right-wing initiatives, such as Breitbart News, aimed at upending the Western political order. Senator Carl Levin, the chairman of the investigations committee, convened the first public hearing at 9:30 one July morning in the Hart Senate Office Building. Levin and Roach had plotted lines of questioning with the witnesses. One of them was Deutsche’s Satish Ramakrishna. Nearly four hours into the hearing, Ramakrishna claimed not to know much about the trades’ tax-avoiding purpose. “Did you ever have a conversation with a man named Broeksmit?” Levin demanded. Ramakrishna acknowledged the phone call had taken place but insisted that Bill was merely observing that taxes were one of many reasons for the trades. Levin noted that just a minute earlier, Ramakrishna had maintained his ignorance about the tax rationale. Ramakrishna now acknowledged what the recorded phone call made plain—and what Deutsche had been so determined to deny. “He did say tax benefit was one of the benefits, yes,” Ramakrishna conceded. “He knew as well as I did.”
It was the first public hint that Broeksmit might have been snared in a dangerous situation.
As all of this was unfolding, Deutsche executives were rushing to contain the damage. One day in May 2014, Colin Fan walked into a makeshift TV studio to record a video for the entire staff of the investment bank. Born in Beijing, raised in Canada, and educated at Harvard, Fan was a towering man with spiky black hair and such a young, chubby face that people regularly mistook him for being in his twenties. In fact, he was forty-one years old and, riding Anshu’s coattails, had ascended to the top of Deutsche’s investment-banking division. It was Fan’s legions of envelope-pushing traders and salesmen who were responsible for many of the bank’s current legal troubles. In case after case, his traders had been so cocky or clueless that they had committed their misconduct in writing, blabbing over email and in electronic chat rooms about exactly what they were doing, and why. If these guys had been just a little more careful, the bank might have avoided heaps of very expensive legal problems.
That was the point Fan decided to convey to his thousands of employees. “This is an important message,” he began. “You need to pay close attention.” He was wearing a purple tie and a black suit, and his hands were clasped behind his back as he stared into the camera. “You may not realize it, but right now, because of regulatory scrutiny, all your communications may be reviewed.” The camera zoomed in for a tighter shot of Fan’s face and shoulders. “Some of you are falling waaaaaay short of our established standards. Let’s be clear: Our reputation is everything. Being boastful, indiscreet, and vulgar is not okay. It will have serious consequences for your career.” He took a breath and continued in a calm, almost chirpy tone. “And I have lost patience on this issue. Communications that run even a small chance of being seen as unprofessional stop right now.”
It might have been Fan’s deadpan delivery, as if he were barely managing to suppress a smirk. Maybe it was his implicit admission that misconduct was rampant inside the investment bank. Or perhaps it was his focus on addressing communications about bad behavior, rather than the bad behavior itself. Whatever the case, when the video leaked online, it went viral.
As recriminations flew over who was to blame for all the trouble Deutsche found itself in, there were two distinct camps. In the bank’s London and New York offices, the bogeymen were overzealous regulators and out-of-touch German executives and board members, the old Forces of Darkness whom Edson had railed against. Employees in Frankfurt had a different perspective. A malignant and fast-spreading Anglo-American investment-banking virus had infected the bank twenty years ago, and the disease had ravaged this once-healthy institution.
There was at least one other big problem looming for Deutsche. It was one that nobody knew about yet and that, even if someone had, would not have been easy to defuse or even control. The problem had a name: Val.