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BT fined $63.5 million
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March 11, 1999: 11:34 p.m. ET
Company pleads guilty to criminal record-keeping violations in 1994-96
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NEW YORK (CNNfn) - Bankers Trust pled guilty Thursday to improperly diverting a $19.1 million in unclaimed customer funds to its own accounts in order to enhance the company's financial position.
BT was fined $60 million by the federal government and an additional $3.5 million by New York State.
Bankers Trust (BT) pled guilty in the U.S. District Court in Manhattan to three counts of misstating entries in the bank's records.
Prosecutors said high-ranking bank officials, under pressure to meet financial targets, improperly transferred unclaimed customer checks and deposits into Bankers Trust's own accounts, in a scheme to falsely enhance its financial performance.
The wrongdoing involved a senior managing director and a partner of Bankers Trust, reporting to the top levels of the firm's management, prosecutors said.
The bank said it has fired those who were responsible.
Those individuals were not named in court papers on Thursday, and prosecutors said the investigation continues.
Mary Jo White, the U.S. attorney, criticized companies for pressuring employees to meet financial goals "by any means necessary." She also said members of senior management at Bankers Trust "demonstrated a willful disregard for their legal obligations with respect to the proper handling of unclaimed customer funds and abandoned property, and brazenly used such funds as a 'slush fund' to meet the bank's earnings goals."
As part of the settlement, the bank agreed to restore the funds that were diverted from customers or the unclaimed-funds accounts.
The bank said this settlement concludes the investigation of Bankers Trust, and the firm will continue to cooperate with the government's ongoing investigation.
"This settlement should not have a significant effect on our business going forward," Frank Newman, chairman and chief executive, said in a statement. The fines and associated costs will be reflected in Bankers Trust's 1998 financial statements.
The case stems from the diversion of unclaimed funds from 1994 to early 1996. The bank voluntarily reported these activities to the U.S. attorney, to its own audit committee, to bank regulators and other authorities, conducting its own internal investigation and providing information to the federal prosecutors for their inquiry.
The firm cited a letter from the New York State Banking Department that said: "Based on the actions taken by the bank to date, the NYSBD has concluded that Bankers Trust has put into place the appropriate controls with respect to the management of the affected business."
Deutsche Bank, which has a pending agreement to acquire Bankers Trust, commended its merger partner for settling the case. Rolf-E. Breuer, spokesman for the board of managing directors of Deutsche Bank, said in a statement: "While Deutsche Bank, of course, preserves all its rights under the merger agreement that may arise from the effects of this development on Bankers Trust's or Deutsche Bank's business, we look forward to consummating the merger."
Breuer said he anticipated the merger could complete the approval process in the second quarter of the year.
Bankers Trust shares gained 1/4 Thursday to close at 88-9/16 in trading on the New York Stock Exchange.
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Bankers Trust
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