-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HSe0V+k6Vbwp9OmjJsVhtDpO2+p0IdTeF6E7So/jdkhzSYlCxSiwCzWCoElkLQ5n gJLT96L2pCltpE15/YRd7A== 0000950130-99-001410.txt : 19990315 0000950130-99-001410.hdr.sgml : 19990315 ACCESSION NUMBER: 0000950130-99-001410 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990311 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANKERS TRUST CORP CENTRAL INDEX KEY: 0000009749 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 136180473 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-05920 FILM NUMBER: 99564429 BUSINESS ADDRESS: STREET 1: 130 LIBERTY ST CITY: NEW YORK STATE: NY ZIP: 10006 BUSINESS PHONE: 2122502500 MAIL ADDRESS: STREET 1: 130 LIBERTY STREET CITY: NEW YORK STATE: NY ZIP: 10006 FORMER COMPANY: FORMER CONFORMED NAME: BANKERS TRUST NEW YORK CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BT NEW YORK CORP DATE OF NAME CHANGE: 19671107 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 F0RM 8-K CURRENT REPORT PURSUANT TO SECTION 13 or 15(d) of the SECURITIES EXCHANGE ACT of 1934 Date of Report (Date of earliest event reported) March 11, 1999 BANKERS TRUST CORPORATION ------------------------------------------------------- (Exact name of registrant as specified in its charter) NEW YORK -------------------------------------------------------- (State or other jurisdiction of incorporation) 1-5920 13-6180473 - ------------------------ --------------------------------- (Commission file number) (IRS employer identification no.) 130 LIBERTY STREET, NEW YORK, NEW YORK 10006 -------------------------------------------- --------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (212) 250-2500 -------------- Item 5. OTHER EVENTS - -------------------- (a) On March 11, 1999, Bankers Trust Company, a wholly owned subsidiary of Bankers Trust Corporation (the "Registrant"), announced that it had reached an agreement with the United States Attorney's Office in the Southern District of New York to resolve an investigation concerning inappropriate transfers of unclaimed funds and related record keeping problems that occurred between 1994 and early 1996. This Current Report on Form 8-K files the press release and various additional documents in connection with the agreement which contains certain information to be incorporated into currently effective registration statements filed by the Registrant with the Securities and Exchange Commission under the Securities Act of 1933, as amended. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits (99.1) Press Release of the Registrant dated March 11, 1999. (99.2) Cooperation and Plea Agreement dated March 11, 1999 including Bankers Trust Company Allocution. (99.3) The Information dated March 11, 1999. (99.4) New York State Banking Department News Release dated March 11, 1999, and Letter of Commitment. (99.5) Written Consent under Agreement and Plan of Merger by and among Deutsche Bank AG, Circle Acquisition Corporation and Bankers Trust Corporation dated as of November 30, 1998. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BANKERS TRUST CORPORATION By: /s/ James T. Byrne, Jr. James T. Byrne, Jr. Senior Vice President ---------------------- Date: March 12, 1999 BANKERS TRUST CORPORATION FORM 8-K DATED MARCH 11, 1999 EXHIBIT INDEX Exhibit Number Description of Exhibit (99.1) Press Release of the Registrant dated March 11, 1999. (99.2) Cooperation and Plea Agreement dated March 11, 1999 including Bankers Trust Company Allocution. (99.3) The Information dated March 11, 1999. (99.4) New York State Banking Department News Release dated March 11, 1999, and Letter of Commitment. (99.5) Written Consent under Agreement and Plan of Merger by and among Deutsche Bank AG, Circle Acquisition Corporation and Bankers Trust Corporation dated as of November 30, 1998. This report contains forward looking statements which are subject to certain risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from the current statements. See also "Important Factors Relating to Forward Looking Statements" contained in the Corporation's Annual Report. EX-99.1 2 PRESS RELEASE DATED MARCH 11, 1999 [LOGO] BANKERS TRUST Architects of Value News Release For Release: IMMEDIATE BANKERS TRUST STATEMENT ON SETTLEMENT WITH U.S. ATTORNEY New York, NY, March 11, 1999 -- Bankers Trust Company said today that it has reached an agreement with the United States Attorney's Office in the Southern District of New York to resolve an investigation concerning inappropriate transfers of unclaimed funds and related record keeping problems that occurred between 1994 and early 1996. Bankers Trust discovered these activities in March 1996 and promptly reported them to the U.S. Attorney's Office, banking regulators, the audit committee of its board of directors, and the bank's internal and external auditors. Using outside legal counsel and outside auditors, Bankers Trust conducted an internal investigation and provided extensive information to the U.S. Attorney to aid its inquiry into this matter. It has also regularly briefed regulators on the investigation's progress and the corrective measures the bank has taken. The amounts involved in the investigation have been restored to the appropriate accounts. Pursuant to its agreement with the U.S. Attorney's Office, Bankers Trust will plead guilty to misstating entries in the bank's books and records and will pay a $60 million fine to federal authorities. Separately, Bankers Trust will pay a $3.5 million fine to the State of New York. The agreement concludes the investigation of Bankers Trust, and the firm continues to cooperate with the government's ongoing investigation of these matters. Frank Newman, chairman and chief executive officer of Bankers Trust, said: "We took immediate action to address these problems from the 1994-95 period when we detected them in early 1996. These businesses have been under new management for some time now. The bank has established controls and procedures that we believe are among the most comprehensive and effective in the industry. This settlement should not have a significant effect on our business going forward." Corporate Affairs, 130 Liberty Street, New York Mailing Address: P.O. Box 318, Church Street Station, New York, N.Y. 10008-0318 The New York State Banking Department took note in a letter to Bankers Trust of the "substantial corrective action already undertaken by the Bank, including managerial and procedural changes." The New York State Banking Department letter continued: "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 businesses." Mr. Newman also stated: "We feel it is appropriate to put this three-year- old matter behind us as we near our merger with Deutsche Bank." Rolf-E. Breuer, spokesman of the Board of Managing Directors of Deutsche Bank, stated: "Bankers Trust has informed Deutsche Bank about this matter that arose in earlier years. We commend Bankers Trust for its actions to address this problem, and we welcome their decision to settle the matter now. Deutsche Bank and Bankers Trust are continuing to work together on integration planning. We anticipate that the approval process can be closed in the second quarter. 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 and creating a global financial powerhouse with a balanced transatlantic growth platform." The fines and associated costs will be reflected in Bankers Trust's financial statements in its 10-K form in its 1998 annual report. -end- Media Contact: - -------------- William McBride, Bankers Trust, (212) 250-7961 EX-99.2 3 COOPERATION AND PLEA AGREEMENT DATED MARCH 11, 199 [LETTERHEAD OF U.S. Department of Justice United States Attorney Southern District of New York] The Silvio J. Mollo Building One Saint Andrew's Plaza New York, New York 10007 March 11, 1999 BY HAND - ------- Samuel W. Seymour, Esq. Sullivan & Cromwell 125 Broad Street New York, New York 10004 Carey R. Dunne, Esq. Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Re: United States v. Bankers Trust Company -------------------------------------- 99 Cr.__ Dear Messrs. Seymour and Dunne: 1. On the understandings specified below, the Office of the United States Attorney for the Southern District of New York (the "Office") will accept a guilty plea from BANKERS TRUST COMPANY ("BANKERS TRUST") to Counts One through Three of the above-referenced Information. Counts One through Three each charge BANKERS TRUST with making false entries in bank books and records, in violation of Title 18, United States Code, Section 1005. 2. It is understood and agreed that BANKERS TRUST's allocution at the time of the plea shall include, in haec verba, the statement included as Exhibit --------------- A hereto, the accuracy of which BANKERS TRUST hereby affirms. BANKERS TRUST agrees that the total amount of unclaimed funds unlawfully recorded as BANKERS TRUST's income or reserves, including an unlawful transfer of $1.3 million in outstanding customer checks in 1989, is $19.1 million. Any additional statements by BANKERS TRUST shall be consistent in all material respects with the statements contained in Exhibit A. 3. This Agreement is contingent upon the sentencing judge accepting this Agreement. Should the Court reject the terms of this Agreement, this Agreement shall be void, and neither this Office nor BANKERS TRUST shall be bound by its terms. It is further understood and agreed that the parties will request that the Court accept the terms of this Samuel W. Seymour, Esq. 2 March 11, 1999 Carey R. Dunne, Esq. Agreement pursuant to Fed. R. Crim. P. 11(e)(1)(C), 11(e)(2), 11(e)(3), and Sentencing Guidelines SECTION 6BI.2(c). 4. The parties have reached a stipulation concerning the appropriate amount of the criminal fine in this case pursuant to United States Sentencing Guidelines SECTIONS 8C2.3, 8C2.4, 8C2.5, 8C2.6 and 8C2.8. This Office and BANKERS TRUST therefore stipulate pursuant to Sentencing Guidelines SECTION 6B1.4 that Sixty Million dollars ($60,000,000) is the appropriate sentence and fine in this case. 5. It is understood and agreed that the Court: (i) will impose a total criminal fine of Sixty Million dollars ($60,000,000) pursuant to Fed. R. Crim. P. 11(e)(1)(C); and (ii) will retain jurisdiction to enforce the terms and conditions of this Agreement. The parties understand that this Agreement reflects the particular facts of this case and is not intended as precedent for other cases. 6. It is understood and agreed that BANKERS TRUST shall pay the sum of Sixty Million dollars ($60,000,000) to the Federal Reserve Bank of New York as escrow agent within 48 hours of the entry of its guilty plea, which shall then be wire transferred to the United States, as directed by this Office, on the date of imposition of sentence. All of this amount shall constitute a criminal penalty payable to the United States. It is further understood and agreed that, thereafter, under no circumstances shall BANKERS TRUST be entitled to a refund of any monies paid pursuant to this Agreement. BANKERS TRUST shall also pay a special assessment of $200 per count at sentencing. 7. The parties agree to sentencing without preparation of a Presentence Report. It is further understood and agreed that the parties will seek a finding from the Court pursuant to Fed. R. Crim. P. 32(b)(1) and the policy statement set forth in Sentencing Guidelines SECTION 6A1.1 that the information in the record, including the allocution of BANKERS TRUST attached hereto as Exhibit A, is sufficient to enable the Court to exercise its sentencing authority meaningfully under Title 18, United States Code, Section 3553, and that the preparation of a Presentence Report pursuant to Fed. R. Crim. P. 32 is not necessary. BANKERS TRUST has requested, and the Office agrees to, a two-month adjournment of sentencing in order to permit other regulatory agencies to evaluate BANKERS TRUST's request for regulatory approval to continue to engage in certain businesses. The parties also agree that sentencing will proceed on or before May 12, 1999, unless the Government consents to a further extension. 8. It is understood that BANKERS TRUST will continue to cooperate in connection with the Government's investigation of this and related matters. This cooperation requires that BANKERS TRUST (a) shall truthfully and completely disclose, to the extent permitted by law, all information with respect to the activities of BANKERS TRUST and its officers and employees concerning all matters about which this Office inquires of BANKERS Samuel W. Seymour, Esq. 3 March 11, 1999 Carey R. Dunne, Esq. TRUST, which information can be used for any purpose; (b) shall cooperate fully with this Office, the Federal Bureau of Investigation, the Federal Reserve Bank of New York ("Federal Reserve") and any other government agency designated by this Office; (c) shall develop a plan within 30 days from the date of this plea, which shall be subject to the approval of the Federal Reserve, to make full restitution of all moneys derived from the conduct described in paragraph 9 below; (d) shall submit to the Federal Reserve for its review and approval, within 30 days of the date of this plea, the written internal compliance procedures which the bank already has implemented for the strengthening and maintenance of its records, systems, and internal audit and controls, in order to ensure that such misconduct will not recur in the future; (e) shall attend all meetings at which this Office requests BANKERS TRUST officers' and employees' presence; (f) shall provide to this Office, upon request, any document, record, or other tangible evidence relating to matters about which this Office or any designated law enforcement agency inquires of BANKERS TRUST, to the extent permitted by law; (g) shall truthfully testify before the grand jury and at any trial and other court proceeding with respect to any matters about which this Office may request BANKERS TRUST officers' and employees' testimony; (h) shall bring to this Office's attention all crimes which BANKERS TRUST has committed, all criminal proceedings, investigations, or prosecutions in which BANKERS TRUST has been or is a subject, target or party, and all administrative proceedings in which BANKERS TRUST is likely to be charged for misconduct; and (i) shall commit no further crimes whatsoever. Moreover, any assistance BANKERS TRUST may provide under this Agreement to federal criminal investigators shall be pursuant to the specific instructions and control of this Office and designated investigators. 9. It is understood that this Office cannot, and does not, agree not to prosecute BANKERS TRUST for criminal tax violations. However, if BANKERS TRUST fully complies with the understandings specified in this Agreement, no testimony or other information given by BANKERS TRUST (or any other information directly or indirectly derived therefrom) will be used against BANKERS TRUST in any criminal tax prosecution. Moreover, if BANKERS TRUST fully complies with the understandings specified in this Agreement, neither BANKERS TRUST nor any of its corporate affiliates will be further prosecuted criminally by this Office for any crimes, except for criminal tax violations, concerning (A) the activities, from 1986 to 1996, of BANKERS TRUST officers and employees in the Client Processing Services division relating to: (i) the wrongful conversion of unclaimed customer funds and/or funds that were escheatable in due course to various states as abandoned property; or (ii) the false and misleading recording of such unclaimed funds in BANKERS TRUST's books and records as income or reserves; or (B) any statements that were made or any conduct that occurred in the course of this Office's and the Federal Reserve's investigation in 1996, to the extent that BANKERS TRUST has disclosed the specified activities in paragraph 9(A) and 9(B) to this Office as of the date of this Agreement. This Agreement does not provide any protection against prosecution for any crimes except as set forth above and does not provide any protection for any natural persons against prosecution for any crimes, including those specified in this paragraph. Samuel W. Seymour, Esq. 4 March 11, 1999 Carey R. Dunne, Esq. 10. It is understood and agreed that the Office shall be free to prosecute BANKERS TRUST or any of its corporate affiliates for the conduct set forth in paragraph 9 above: (i) should the Court reject this Agreement, including the stipulated fine of Sixty Million dollars ($60,000,000); (ii) should the allocution of BANKERS TRUST fail to incorporate, in haec verba, ------------- Exhibit A; (iii) should the Court not accept the plea of guilty of BANKERS TRUST; (iv) should any motion to withdraw the plea of guilty, or to attack collaterally a conviction based upon such a plea, be granted and become final; (v) should BANKERS TRUST fail to pay the criminal fine in accordance with this Agreement; or (vi) should BANKERS TRUST violate any other provision of this Agreement. BANKERS TRUST agrees to waive any and all defenses based upon the passage of time that might exist with respect to the matters enumerated in paragraph 9, including, but not limited to, the statute of limitations with respect to any such prosecutions that are not time-barred on the date this Agreement is signed by BANKERS TRUST. 11. It is understood that this Agreement does not bind any federal, state, or local prosecuting authority other than this Office. This Office will, however, bring the cooperation of BANKERS TRUST to the attention of other prosecuting offices, if requested by BANKERS TRUST. 12. It is understood that, should BANKERS TRUST commit any further crimes or should it be determined that BANKERS TRUST has given false, incomplete, or misleading testimony or information, or should BANKERS TRUST otherwise violate any provision of this Agreement, BANKERS TRUST shall thereafter be subject to prosecution for any federal criminal violation of which this Office has knowledge, including obstruction of justice. Any such prosecution that is not time-barred by the applicable statute of limitations on the date of the signing of this Agreement may be commenced against BANKERS TRUST, notwithstanding the expiration of the statute of limitations between the signing of this Agreement and the commencement of such prosecution. It is the intent of this Agreement to waive all defenses based on the statute of limitations with respect to any prosecution that is not time-barred on the date that this Agreement is signed. 13. It is understood that in the event that it is determined that BANKERS TRUST has committed any further crimes, given false, incomplete, or misleading testimony or information, or otherwise violated any provision of this Agreement, (a) all statements made by BANKERS TRUST and its officers and employees to this Office or other designated law enforcement agents, and any testimony given by BANKERS TRUST and its officers and employees before a grand jury or other tribunal, whether prior to or subsequent to the signing of this Agreement, and any leads from such statements or testimony shall be admissible in evidence in any criminal proceeding brought against BANKERS TRUST; and (b) BANKERS TRUST shall assert no claim under the United States Constitution, any statute, Rule 11(e)(6) of the Federal Rules of Criminal Procedure, Rule 410 of the Federal Rules of Evidence, or any other federal rule that such statements or any leads therefrom should be suppressed. It is Samuel W. Seymour, Esq. 5 March 11, 1999 Carey R. Dunne, Esq. the intent of this Agreement to waive all rights in the foregoing respects. 14. This Agreement supersedes any prior understandings, promises, or conditions between this Office and BANKERS TRUST. No additional understandings, promises, or conditions have been entered into other than those set forth in this Agreement, and none will be entered into unless in writing and signed by all parties. Very truly yours, MARY JO WHITE United States Attorney By: /s/ Alex Young K. OH -------------------------------- ALEX YOUNG K. OH Assistant United States Attorney (212) 637-2218 APPROVED: /s/ Mark F. Pomerantz --------------------------------- MARK F. POMERANTZ Chief, Criminal Division AGREED AND CONSENTED TO: BANKERS TRUST COMPANY /s/ David R. Brown, IV March 11, 1999 - -------------------------- ---------------- By: DAVID R. BROWN, IV DATE Pursuant to Authority Conveyed by Resolution of the Board of Directors of BANKERS TRUST COMPANY APPROVED: /s/ Samuel W. Seymour, ESQ. 3/11/99 - --------------------------- --------------- SAMUEL W. SEYMOUR, ESQ. DATE Counsel to BANKERS TRUST APPROVED: /s/ Carey R. Dunne, ESQ. 3/11/99 - --------------------------- --------------- CAREY R. DUNNE, ESQ. DATE Counsel to BANKERS TRUST EXHIBIT A Rule 11(e)(6) Plea Discussions Bankers Trust Company Allocution Bankers Trust Company, which I will refer to as "the Bank," has authorized me to enter a plea of guilty to three counts of 18 U.S.C. SECTION 1005 on the Bank's behalf. The Bank is a "member bank" within the meaning of 18 U.S.C. SECTION 1005. The transactions that are the subject of the Information occurred in what was called the Client Processing Services ("CPS") business of the Bank. CPS was an organizational unit of the Bank that provided processing, fiduciary and trust services to the clients and customers of the Bank. At any given time, there is a small percentage of the funds processed by CPS that are unclaimed or whose rightful owners are unidentifed. From January 1994 through March 1996, a group of executives and employees of the Bank, who are no longer employed by the Bank, unlawfully, willfully and knowingly caused a number of false entries to be made in the books and records of the Bank with the intent of concealing the nature and source of transactions from, and to deceive, the Bank's auditors and regulators, including the Federal Reserve Bank of New York. Their purpose in doing so was to falsely enhance the financial performance of CPS, which had the effect of making the Bank's financial performance appear better than it actually was. In certain instances, these individuals acted contrary to the express legal advice of the Bank's outside counsel. Although this group of employees included the senior manager and the controller of the business unit, the Bank believes that a small number of CPS employees were involved in the knowing falsification of the Bank's records. As I will describe in more detail in a moment, the falsification of the Bank's records arose in connection with improper transfers of unclaimed funds to reserve accounts and to the Bank's income. These funds may with the passage of time become abandoned property subject to the escheatment laws of the state of New York and other states. The false entries that are the subject of the Information relate to certain of these funds that belonged to customers or other third parties or were escheatable. This conduct occurred, in part, in the Southern District of New York. The transactions described in the Information occurred in three business units within CPS. The first such business was the Corporate Trust and Agency Group ("CTAG"), which provides paying agent services to the issuers of securities. In the course of this business, CTAG issued checks to securities holders. Some checks were never presented for payment by the payee. The second unit was the Retirement Services Group ("RSG"), which provided a wide variety of services to employee benefit plans, including employee benefit payment services. In the course of this business, RSG issued checks to plan beneficiaries. Some checks were never presented for payment by the payee. The third unit, Global Securities Services ("GSS"), provided custodial services to a wide range of customers. In the course of this business, GSS received credits on behalf of customer accounts, in its capacity as a domestic or global custodian of assets. Some credits in GSS were unidentified or irreconcilable to corresponding customer accounts. With respect to Count One of the Information, on or about June 30, 1994, employees of CPS unlawfully, willfully and knowingly caused approximately $2.4 million of aged outstanding checks issued by CTAG as paying agent to be transferred from liability accounts to the Bank's income and reserves. These transactions were falsely recorded as "movement of funds," causing the books and records of the Bank to be 2 inaccurate. The employees who recorded these entries did so with the intent to conceal the nature and source of the transferred funds from the Bank's auditors and regulators. With respect to Count Two, in or about May 1995, employees of CPS unlawfully, willfully and knowingly caused approximately $946,610.48 of aged outstanding checks from the RSG business to be transferred from outstanding liability accounts to a reserve account of the Bank. These transactions were falsely recorded as "OCS reclass," causing the books and records of the Bank to be inaccurate. The employees who recorded these entries did so with the intent to conceal the nature and source of the transferred funds from the Bank's auditors and regulators. With respect to Count Three, on or about February 9, 1996, employees of CPS unlawfully, willfully and knowingly caused approximately $3.9 million of aged credits arising from transactions in the GSS business to be transferred from outstanding liability or suspense accounts to reserve accounts. These transactions were falsely recorded as "reserve funds" or "beginning reserve balance," causing the books and records of the Bank to be inaccurate. The employees who recorded these entries did so with the intent to conceal the nature and source of the transferred funds from the Bank's auditors and regulators. In moving various funds to Bank reserves, the CPS employees acted with the purpose and expectation that these funds would later be used to falsely enhance the financial performance of CPS, which had the effect of falsely enhancing the Bank's financial performance. The total amount of unclaimed funds unlawfully recorded as the Bank's income or reserves from 1994 through early 1996, including an unlawful transfer of $1.3 3 million in outstanding customer checks in 1989, is $19.1 million. The Bank acknowledges the violations of U.S. criminal law to which it is pleading guilty. The Bank accepts responsibility for these transactions and the conduct of its employees. It deeply regrets that its former employees engaged in such transactions. In doing so, they violated the Bank's policies and procedures as well as the Bank's commitment to its clients. As the Bank learned of these transactions beginning in March 1996, it promptly reported the conduct to the Department of Justice, the Federal Reserve Bank of New York and the New York State Banking Department. The Bank also, with the assistance of outside counsel and Arthur Andersen, LLP, conducted a complete forensic review of the transactions involved. The Bank has cooperated with the government's investigation into these matters and will continue to cooperate under the Cooperation and Plea Agreement executed by the Bank today. The Bank has reversed all of the transactions and has, or is in the process of, compensating any customers or third parties affected by these transactions and complying with its escheatment obligations relating to these funds. When the Bank discovered and reported these transactions beginning in March 1996, it substantially changed the management of Global Institutional Services, which includes the former CPS businesses, and adopted a comprehensive system of controls designed to prevent recurrence of the conduct underlying the transactions. These controls include new policies and procedures regarding the handling of unclaimed property. The Bank has implemented a thorough training program for all the employees in Global Institutional Services regarding these new policies and procedures. To put this conduct in context, the Bank's earnings were $615 million in 4 1994 and $215 million in 1995. In 1994-1995, CPS employed over 4,500 people. In 1995, CPS administered approximately $422 billion of debt and held $1.4 trillion dollars in assets under custody. On a daily basis, approximately $400 billion was processed by the CPS unit. The Bank takes very seriously its responsibility to preserve and protect the assets of its clients, and the vast majority of funds processed by CPS were handled correctly and in accordance with our clients' instructions. March 11, 1999 5 EX-99.3 4 THE INFORMATION DATED MARCH 11, 1999 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - x UNITED STATES OF AMERICA V. INFORMATION ----------- BANKERS TRUST COMPANY, 99 Cr. __ ( ) Defendant. - - - - - - - - - - - - - - - - - - - - - x COUNTS ONE THROUGH THREE ------------------------ (False Entries in Bank Books and Records) The Grand Jury charges: Introduction ------------ 1. At all times relevant to this Information, the defendant BANKERS TRUST COMPANY ("BANKERS TRUST") was a bank chartered under the laws of the State of New York. BANKERS TRUST was headquartered in New York, New York, and provided a full range of financial and fiduciary services to institutional and individual customers through offices located throughout the United States. As a state member bank, BANKERS TRUST was subject to periodic examinations by the Federal Reserve Board ("Federal Reserve") and required to file periodic reports of its banking activities and financial condition with the Federal Reserve. BANKERS TRUST was a wholly-owned subsidiary of Bankers Trust New York Corporation ("Bankers Trust Corp."), a publicly-held bank holding company incorporated in New York, New York. 2. At all times relevant to this Information, Client Processing Services, which was also sometimes known as Global Assets or Global Institutional Services ("CPS") was one of the organizational units within the defendant BANKERS TRUST, through which BANKERS TRUST provided processing, fiduciary and trust services to institutional and individual clients. CPS employed approximately 4,500 people, which constituted approximately one-third of BANKERS TRUST's total personnel. CPS generated a substantial portion of Bankers Trust Corp.'s income; for example, in 1995, CPS generated more than one- third of Bankers Trust Corp.'s income. 3. At all times relevant to this Information, CPS was headed by one of the defendant BANKERS TRUST's senior Managing Directors who was also a Partner (the "Partner") of BANKERS TRUST. The Partner reported directly, at various times, to the President, Vice-Chairman, and the Chairman of Bankers Trust Corp. Another Managing Director of BANKERS TRUST was the Controller of CPS (the "Managing Director"). The Managing Director reported directly to the Partner, and at times, indirectly to the Chief Financial Officer of Bankers Trust Corp. 4. At all times relevant to this Information, the Federal Reserve was responsible for, among other things, maintaining the safety and soundness of banks located in the United States. Among its other responsibilities, the Federal Reserve conducted periodic examinations of the defendant BANKERS TRUST's accounts, records, and financial condition in order to 2 evaluate BANKERS TRUST's safety and soundness. 5. At all times relevant to this Information, by law and by rules and regulations of the Federal Reserve, the defendant BANKERS TRUST was required to maintain in safekeeping all customer funds and to maintain accurate books and records of all customer transactions. BANKERS TRUST was not entitled to convert customer funds to its own use and benefit. 6. To ensure that the defendant BANKERS TRUST was complying with all rules and regulations of the Federal Reserve relating to, among others, banking and fiduciary services, examiners of the Federal Reserve periodically inspected BANKERS TRUST's books and records. 7. At all times relevant to this Information, the New York State Banking Department was responsible for supervising banking institutions licensed by the State of New York. Among its other responsibilities, the New York State Banking Department conducted examinations of the accounts, records, and financial condition of state banks. Background ---------- Unclaimed Funds in CPS ---------------------- 8. At all times relevant to this Information, the CPS area of the defendant BANKERS TRUST generated revenues by providing, among other things, custodial, trust and processing services for institutional and individual customers. CPS was subdivided into various business units, including: (i) the 3 Corporate Trust and Agency Group ("CTAG"), which provided, among other things, paying agent and fiduciary services to issuers of securities; (ii) the Retirement Services Group ("RSG"), which provided, among other things, custodial, trust administration and asset management services to employee benefit and pension plans of corporations, governments and their agencies; and (iii) Global Securities Services ("GSS"), which provided, among other things, custodial, processing and clearing services to purchasers and sellers of securities. The fees that CTAG, RSG and GSS earned from providing these services were a significant component of the overall income earned by BANKERS TRUST. 9. From time to time, the custodial, trust and processing services performed in CPS generated certain credits and unclaimed customer funds ("unclaimed funds") as reflected on the defendant BANKERS TRUST's books and records. For example, in CTAG, BANKERS TRUST, as paying agent for issuers of securities, issued checks to securities holders that reflected distributions of dividends and interests earned on such securities. From time to time, securities holders did not cash these checks ("CTAG checks"). Similarly, in RSG, as administrator of various employee benefit and pension plans, BANKERS TRUST issued benefit checks on behalf of such plans to plan beneficiaries. From time to time, these benefit checks went uncashed ("RSG benefit checks"). Similarly, in GSS, BANKERS TRUST from time to time was overpaid for the clearing, settling and agent bank functions that 4 it performed relating to securities transactions. The overpayments ("GSS credits") generated in connection with these securities transactions remained on BANKERS TRUST's books and records as credits. BANKERS TRUST was required to maintain such GSS credits in suspense or trust accounts until such time as their rightful ownership was determined. 10. At all times relevant to this Information, as set forth in more detail in paragraphs 11 and 12 below, the defendant BANKERS TRUST was not permitted to convert such unclaimed funds -- including CTAG checks, RSG benefit checks and GSS credits -- to BANKERS TRUST's own use and benefit. This was so even where it appeared that certain customers might never come forward to claim their money. BANKERS TRUST's Obligations Under State Abandoned Property Laws --------------------------------- 11. At all times relevant to this Information, under New York State law, the defendant BANKERS TRUST was required under certain circumstances to escheat to New York State unclaimed funds, including funds comprising CTAG checks, RSG benefit checks and GSS credits. Specifically, where, after three years, (1) the rightful owner of unclaimed funds, including funds underlying CTAG checks, RSG benefit checks and GSS credits had not asserted a claim to such funds, and (2) the requirement of New York State jurisdiction over such unclaimed funds were met, BANKERS TRUST was obligated by New York law to escheat such unclaimed funds to New York as abandoned property. 5 12. At all times relevant to this Information, where the requirements of New York State jurisdiction over unclaimed funds were not met, the defendant BANKERS TRUST was required by various states' laws and by its own stated policies to maintain such unclaimed funds on its books and records as liabilities. This requirement recognized the possibility of future claims to these funds either by customers or by another state or states that demonstrated their entitlement to such funds as abandoned property. BANKERS TRUST was obligated by law and by rules and regulations of the Federal Reserve and the New York State Banking Department to maintain in safekeeping all unclaimed funds and to maintain accurate books and records of unclaimed funds. Certain officers and employees of BANKERS TRUST, including the Partner and the Managing Director, received legal advice that unclaimed funds could not be converted, or taken into BANKERS TRUST's own income. 13. To ensure that the defendant BANKERS TRUST was properly escheating unclaimed funds to the State of New York, auditors from the State Office of Unclaimed Funds periodically audited BANKERS TRUST's books and records relating to abandoned property. The Pressure to Meet Financial Targets in 1994 and 1995 ---------------------------------- 14. In 1994 and 1995, the defendant BANKERS TRUST's income declined significantly, due to a number of negative market developments. In order to compensate for this decline in income 6 in 1994 and 1995 and also to reduce expenses, the management of BANKERS TRUST put significant pressure on all areas of its business, including CPS, to generate additional revenues and to lower expenses. In response to this pressure, the Partner and the Managing Director, in turn, put significant pressure on CPS officers and employees to meet revenue goals established by BANKERS TRUST for CPS for the years 1994 and 1995. The Unlawful Diversion of Unclaimed Funds to Meet Financial Targets ----------------------------------------- 15. From in or about January 1994 through in or about March 1996, the defendant BANKERS TRUST, the Partner, the Managing Director and certain other officers and employees of BANKERS TRUST in CPS, participated in an unlawful scheme to convert unclaimed funds -- which belonged to customers and/or were escheatable in due course to various states other than New York -- for the purpose of meeting revenue and expense targets imposed by BANKERS TRUST. These officers and employees also sought to conceal their fraudulent enhancement of BANKERS TRUST's financial performance from the public, outside auditors and regulators by making false and deceptive entries in BANKERS TRUST's books and records. 16. From in or about January 1994 to in or about September 1995, certain officers and employees of the defendant BANKERS TRUST, including the Partner and the Managing Director, transferred approximately $4.27 million in outstanding CTAG checks from liabilities accounts on BANKERS TRUST's books and 7 records and transferred the funds to BANKERS TRUST's income and reserve accounts. These funds were used by these officers and employees to falsely enhance BANKERS TRUST's revenues and offset BANKERS TRUST's expenses. 17. In or about May 1995, certain officers and employees of the defendant BANKERS TRUST, including the Partner and the Managing Director, transferred approximately $1.65 million in outstanding RSG benefit checks from liabilities accounts on BANKERS TRUST's books and records to BANKERS TRUST's reserve accounts. These funds were used by these officers and employees to falsely enhance BANKERS TRUST's revenues and offset BANKERS TRUST's expenses. 18. From in or about January 1994 to in or about September 1995, certain officers and employees of the defendant BANKERS TRUST, including the Partner and the Managing Director, transferred approximately $11.92 million in GSS credits from trust or suspense accounts on BANKERS TRUST's books and records to BANKERS TRUST's income and reserve accounts. These funds were used by these officers and employees to falsely enhance BANKERS TRUST's revenues and offset BANKERS TRUST's expenses. 19. From in or about May 1995 to in or about March 1996, certain officers and employees of the defendant BANKERS TRUST, including the Partner and the Managing Director, engaged in a search for additional unclaimed funds to be transferred from various liabilities, trust or suspense accounts on BANKERS 8 TRUST's books and records to BANKERS TRUST's income and reserve accounts, to be used to falsely enhance BANKERS TRUST's revenues and to offset BANKERS TRUST's expenses. 20. At all times relevant to this Information, the defendant BANKERS TRUST and certain of its officers and employees, including the Partner and the Managing Director: (i) falsely enhanced BANKERS TRUST's financial performance by applying converted unclaimed funds to BANKERS TRUST's income or expense accounts; and (ii) concealed the true source of the funds enhancing BANKERS TRUST's financial performance from the public, outside auditors and regulatory examiners by referring to these misappropriated unclaimed funds on the records supplied to outside auditors and regulatory examiners in misleading and false terms, such as "reserves," "reclassed" funds or "movement of funds." Means and Methods of the Unlawful Diversion Of Unclaimed Funds ------------------------------------- 21. Among the means and methods used by the defendant BANKERS TRUST and certain of its officers and employees, including the Partner and the Managing Director, to implement the unlawful scheme to misappropriate unclaimed funds, were the following: a. Certain officers and employees of BANKERS TRUST, including the Partner and the Managing Director, devised a scheme to unlawfully divert unclaimed funds in various accounts, including customer accounts, and to use these funds for BANKERS 9 TRUST's benefit. b. Certain officers and employees of BANKERS TRUST, including the Partner and the Managing Director, first identified unclaimed funds in various accounts, deeming these funds "opportunities," for falsely enhancing BANKERS TRUST's income. c. Once unclaimed funds were identified as "opportunities," certain officers and employees of BANKERS TRUST, including the Partner and the Managing Director, unlawfully extinguished the unclaimed funds from BANKERS TRUST's books and records as liabilities and transferred the funds to BANKERS TRUST's income or expense accounts. These income and expense accounts ordinarily were funded by BANKERS TRUST's own income. d. From time to time, certain officers and employees of BANKERS TRUST, including the Partner and the Managing Director, unlawfully extinguished the unclaimed funds from BANKERS TRUST's books and records as liabilities and transferred the funds to BANKERS TRUST's reserve accounts, where the funds became commingled with BANKERS TRUST's own funds. e. Once unclaimed funds were transferred to BANKERS TRUST'S reserve accounts, the reserve accounts were used as a "slush fund" by certain officers and employees of BANKERS TRUST, including the Partner and the Managing Director, to supplement income or to offset expenses as needed at the end of a financial reporting period, thereby falsely enhancing BANKERS 10 TRUST's financial results for that period. f. In order to conceal the fraudulent enhancement of BANKERS TRUST's financial performance through the unlawful conversion of unclaimed funds from the public, outside auditors and regulatory examiners, certain officers and employees of BANKERS TRUST, including the Partner and the Managing Director, made or caused to be made certain false and misleading entries in BANKERS TRUST's books and records, including: (i) the labeling of transfers of unclaimed funds from liabilities, trust or suspense accounts to BANKERS TRUST's income, expense and reserve accounts as "movement of funds" and "reclass" of funds; and (ii) the labeling of unclaimed funds unlawfully transferred to BANKERS TRUST's reserve accounts generally as "reserve" funds, rather than as outstanding liabilities. The Statutory Charge -------------------- 22. On or about the dates set forth below, in the Southern District of New York and elsewhere, the defendant BANKERS TRUST, a state member bank, unlawfully, wilfully and knowingly did make, and cause to be made, the corresponding false entries set forth below in the books, reports, and statements of BANKERS TRUST with the intent to injure and defraud its customers and bodies politic, and to deceive the Board of Governors of the Federal Reserve System and its agents and examiners appointed to examine the affairs of BANKERS TRUST: 11
COUNT APPROX. DATE FRAUDULENT ENTRY - ----- ------------ ---------------- ONE June 30, 1994 Automated Journal Ticket reflecting the cancellation of approximately $2.4 million in outstanding CTAG checks as "movement of funds." TWO May 24, 1995 Journal Ticket identifying the cancellation and movement to a BANKERS TRUST reserve account of $946,610.48 in outstanding RSG checks as "OCS Reclass." THREE February 9, 1996 Reserve account schedule reflecting $3.9 million in GSS credits as "beginning reserve balance."
(Title 18, United States Code, Sections 1005 and 2.) /s/ Mary Jo White ---------------------- MARY JO WHITE United States Attorney 12 EX-99.4 5 NEW YORK STATE BANKING DEPARTMENT NEWS RELEASE [LETTERHEAD OF NEW YORK STATE BANKING DEPARTMENT] NEWS RELEASE NEW YORK STATE BANKING DEPARTMENT ENTERS INTO LETTER OF COMMITMENT WITH BANKERS TRUST NEW YORK, March 11, 1999 - The New York State Banking Department entered into a letter of commitment today with Bankers Trust Company under which the bank agreed to pay a fine of $3.5 million to New York State for past improprieties in the business practices of its Client Processing Services Division. The letter of commitment outlines the actions already taken by Bankers Trust to put into place appropriate controls to ensure that this business continues to be conducted in accordance with all applicable laws, regulations, and bank policies and procedures. A copy of the letter is attached to this news release. The New York State Banking Department is the regulator for all State-chartered banking institutions, including seven of the State's ten largest banks, and virtually all of the U.S. offices of international banking institutions. The cumulative assets of companies and institutions supervised by the Banking Department exceed $1.9 trillion. # # # [LETTERHEAD OF STATE OF NEW YORK BANKING DEPARTMENT] March 11, 1999 Mr. Frank N. Newman Chairman of the Board Bankers Trust Company One Bankers Trust Plaza New York, NY 10006 Re: Past Improprieties in the business practices of the Client Processing Services Division ------------------------------------------ Dear Mr. Newman: This letter will evidence the commitment of Bankers Trust Company ("BT" or the "Bank") to the New York State Banking Department ("NYSBD" or "Superintendent") to take the actions provided for herein pursuant to Section 39 of the New York Banking Law, including the payment of the sum of $3.5 million to the People of the State of New York. In determining the appropriate regulatory action to be taken in this matter, the NYSBD took into consideration the fact that on March 11, 1999, the Bank entered into a plea agreement with the United States Attorney's Office for the Southern District of New York relating to the activities described below which included the payment of a $60 million penalty, the substantial corrective actions already undertaken by the Bank, including managerial and procedural changes and the expenses that the Bank has incurred in meeting the commitments that have been heretofore made under the supervision of the NYSBD. Summary of Facts: - ----------------- The Bank received funds as fiduciary and/or custodian and maintained said funds in the business units of its Client Processing Services ("CPS") division./1/ The Bank has acknowledged that the business practices employed by the CPS business units led to the improper maintenance of accounts into which certain unclaimed and abandoned funds entrusted to the Bank as fiduciary and/or custodian throughout the period from the early 1990's to 1995 were deposited. Further, senior management of the Bank failed to detect the improper maintenance of said accounts for a number of years and the Bank did not maintain adequate policies and procedures and internal control systems to detect, supervise or control the business practices of CPS concerning the treatment of certain unclaimed and abandoned property. - ------------- /1/ Due to the events that occurred In the CPS business, the Bank reorganized the CPS business lines and placed them under the Global Institutional Services business unit. The Bank has acknowledged that CPS improperly maintained and recorded certain unclaimed and abandoned funds that created the impression that CPS had generated greater net income through its business activities than the business unit had actually produced. All of the above activities constitute unauthorized practices for a banking organization. Upon discovery of these improprieties, the Bank notified the NYSBD and its federal bank regulator of these and also notified the United States Attorney for the Southern District of New York. Subsequently, the Bank cooperated with the investigations of this matter conducted by the United States Attorney for the Southern District of New York, the Federal Reserve Bank of New York and the NYSBD. Additionally, the Bank retained outside counsel and engaged an independent public accounting firm not associated with the Bank to assist the Bank in performing a comprehensive forensic and diagnostic review of the activities of CPS during the relevant period. Actions Taken: - -------------- Based on the results of that review, and in consultation with the NYSBD, remedial steps were taken by the Bank as outlined below: 1. The Bank adopted improved policies and procedures relating to accounting practices, risk assessment, compliance and internal control procedures, and management information reporting; and 2. The Bank adopted new training programs for its personnel in this area with respect to business practices and responsible decision making; and 3. The Bank replaced and supplemented personnel in this area, including the replacement of the head of the business group and the head of the areas specifically involved in the offending behavior; and 4. The Bank created an independent risk management and control function that reports outside the business line to the senior management in charge of corporate risk management and control; and 5. The Bank enhanced its internal audit functions including expansion of the audit scope and increasing the size of the audit staff; and 6. The annual external audit of the business was extended to include a review of the improved policies and procedures detailed in paragraph one above; and 7. The Bank commenced and substantially completed appropriate restitution of the amounts involved. Commitments of Bank: - -------------------- By agreeing to the following commitments, BT represents that it waives its right to a hearing for the purposes of taking evidence on any matter discussed herein and waives any and all rights that BT may have pursuant to Sections 39 and 44 of the New York Banking Law, or otherwise, relating: (a) to the issuance of a formal notice of charges and the holding of a hearing; (b) to obtaining judicial review of the matters discussed herein; and (c) to challenging or contesting in any manner the basis, issuance, validity, effectiveness, collectibility or enforceability of the commitments to which it has agreed; and (d) to judicial review of this Order. 2 The NYSBD acknowledges that although BT agrees to the commitments set forth herein, such agreement does not constitute an admission or denial of any allegation made or implied by the Superintendent that was not made a part of the aforesaid March 11, 1999 plea agreement into which BT entered with the United States Attorney for the Southern District of New York. BT agrees to undertake the following commitments for the purpose of resolving this matter without protracted or extended regulatory review and proceedmgs: 1. To pay the sum of $3.5 million to the People of the State of New York within 24 hours after any fines or penalties are paid to the United States Treasury and no sooner; and 2. To maintain the new policies, procedures and internal audit scope and frequency set out above (the "New Policies and Procedures"), and to make no material changes therein without the prior approval of the Superintendent; and 3. To provide such periodic reports to the Superintendent and to the Bank's Board of Directors, as they may request, regarding compliance with the New Policies and Procedures; and 4. To complete as soon as practicable any additional necessary restitution and report accordingly to the NYSBD. The commitments made by BT herein shall be binding on BT and its successors and assigns and shall not bar, estop or otherwise prevent the Superintendent, or any state agency or department from taking any other action affecting BT or its successors or assigns. The commitments expressed herein may not be modified or amended without the prior written consent of the Superintendent. Based on the actions taken by the Bank to date, the NYSBD has concluded that BT has put into place the appropriate controls with respect to the management of the affected businesses. Very truly yours, /s/ Daniel A. Muccia --------------------------- Daniel A. Muccia Acting First Deputy Superintendent of Banks Acknowledged and agreed this 11th day of March, 1999. Bankers Trust Company By: /s/ Frank N. Newman - --------------------- Frank N. Newman Chairman of the Board 3 EX-99.5 6 WRITTEN CONSENT UNDER AGREEMENT AND PLAN OF MERGER MELVIN A. YELLIN Executive Vice President and General Counsel Bankers Trust Corporation [LOGO] BANKERS TRUST Architects of Value March 11, 1999 Deutsche Bank AG Taunusanlage 12 60325 Frankfurt am Main Germany Dear Sirs: We refer to the Agreement and Plan of Merger by and among Deutsche Bank AG ("DB"), Circle Acquisition Corporation and Bankers Trust Corporation ("BT") dated as of November 30, 1998 (the "Merger Agreement"). We hereby request, and your signature below shall constitute, your prior written consent pursuant to Section 5.2(g) of the Merger Agreement for BT's subsidiary, Bankers Trust Company ("BTCo"), to enter into and perform its obligations under the Plea Agreement with the U.S. Department of Justice on the terms set forth in Annex 1 hereto. We confirm and agree that by executing such consent DB is not waiving any rights it may have now or at any time in the future pursuant to the Merger Agreement or otherwise. Without limiting the foregoing, we confirm and agree that such Plea Agreement, and BTCo's performance of its obligations thereunder, and any direct or indirect consequences of the foregoing, would be taken into account in connection with any determination under any provision of the Merger Agreement as to whether or not there has been a "Material Adverse Effect" as defined in Section 9.12 of the Merger Agreement. Very truly yours, BANKERS TRUST CORPORATION By: /s/ Melvin A. Yellin ---------------------- Executive Vice President Accepted and agreed as of the date first above written. DEUTSCHE BANK AG By: /s/ Klaus Kohler Hans-Dirk Krekler ---------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----