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From Antitrust Law Daily, April 23, 2015

LIBOR probe nets $2.5B from Deutsche Bank and its U.K subsidiary

By Jeffrey May, J.D.

Deutsche Bank AG has agreed to pay more than $2.5 billion in settlements with U.S. and U.K. agencies resolving investigations into the company's role in the manipulation of interbank offered rates benchmarks across a range of currencies. The settlements are with the U.S. Department of Justice, the Commodity Futures Trading Commission (CFTC), and the New York State Department of Financial Services (NYDFS), as well as the U.K. Financial Conduct Authority (FCA), the company announced today.

U.S. Department of Justice actions. Deutsche Bank entered into a deferred prosecution agreement (DPA) with the Justice Department to resolve wire fraud and antitrust charges in connection with its role in both manipulating the U.S. Dollar London Interbank Offered Rate or LIBOR and engaging in a price fixing conspiracy to rig Yen LIBOR. The company's wholly-owned U.K. subsidiary, DB Group Services (UK) Limited, has agreed to plead guilty to wire fraud for its role in manipulating the LIBOR. The plea agreement and DPA were filed in the federal district court in Connecticut.

Deutsche Bank and its subsidiary will pay a total of $775 million in criminal penalties as a result of the Justice Department actions. Under the DPA, Deutsche Bank has agreed to pay a monetary penalty in the amount of $625 million. DB Group Services has agreed to plead guilty to one count of wire fraud and to pay a $150 million fine. Deutsche Bank also has agreed to retain an independent compliance monitor for three years. If the company fully complies with its obligations under the DPA, the Justice Department will not continue the criminal prosecution against Deutsche Bank.

The Justice Department contends that Deutsche Bank derivatives traders engaged in efforts to move the benchmark rates in a direction favorable to their trading positions between 2003 and 2011. The government pointed to face-to-face requests; electronic communications, which included both e-mails and electronic chats; and telephone calls to document the scheme. Deutsche Bank admitted that the conduct affected the resulting LIBOR fix on various occasions.

Five other banks have settled with the Justice Department for their roles in the manipulation of benchmark interest rates, including Barclays Bank PLC, UBS AG, The Royal Bank of Scotland plc, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank), and Lloyds Banking Group plc. In addition, 12 individuals have been charged as a result of this investigation, and three of those individuals have pleaded guilty. The earliest Justice Department charges were filed in December 2012.

Settlements with regulators. In addition to the penalties sought by the Justice Department, Deutsche Bank has agreed to pay approximately $1.744 billion in regulatory penalties and disgorgement. This includes payments of $800 million to the CFTC, $600 million to the NYDFS, and £227 million (approximately $344 million) to the U.K. FCA. According to an FCA statement, Deutsche Bank's fine was discounted 30% (from £324 million) in light of the company's decision to settle in the early stages of the investigation. Under the terms of a CFTC order and a NYDFS consent order, the company also has agreed to improve internal controls to avoid future law violations.

Attorneys: Richard A. Powers for U.S. Department of Justice Antitrust Division. Roberto Finzi, Andrew Finch, and Theodore V. Wells, Jr. (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for Deutsche Bank AG and DB Group Services UK Ltd.

Companies: Deutsche Bank AG; DB Group Services UK Ltd.;

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