Deutsche Bank
“This case has been particularly meaningful to me, given the misconduct at issue — Deutsche Bank’s lending and servicing of Jeffrey Epstein’s accounts — despite knowledge that he sexually abused at least 40 girls.”
Emma Gilmore
Emma Gilmore
On September 27, 2022, Pomerantz reached a $26.25 million settlement with Deutsche Bank AG, in a securities class action stemming from the Bank’s failure to properly adhere to its own due diligence protocols. Previously, in May of 2022, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York denied in large part defendants’ motion to dismiss all claims in the case.
The complaint alleges that Deutsche Bank failed to properly adhere to its own Know Your Customer (“KYC”) policies when dealing with customers it considered high-risk, such as accused sex offender Jeffrey Epstein. The Bank repeatedly assured investors that it had “developed effective procedures for assessing clients and processes for accepting new clients in order to facilitate comprehensive compliance” with these policies. Defendants also claim that Deutsche’ Bank’s robust and strict KYC procedures include “strict identification requirements, name screening procedures and the ongoing monitoring and regular review of all existing business relationships,” with “safeguards…implemented for…politically exposed person (“PEP”)[.]” In reality, however, during the Class period, Defendants repeatedly exempted high net-worth individuals and PEPs from any meaningful due diligence, further enabling their crimes through the use of the Bank’s facilities. This pattern of defiance began with Deutsche Bank’s former CEO’s onboarding, retaining, and servicing of Russian oligarchs and PEPs reportedly engaged in criminal activities.
For example, in 2013, Deutsche Bank took on Jeffrey Epstein as a client, despite his previous convictions for and new allegations of child sex trafficking and abuse. Because Epstein was regarded as a “high-risk” customer from the moment he was onboarded as a client, he should have been subject to the strict due diligence required by the Bank’s KYC program; however, he was instead classified as an “Honorary PEP,” and his activities within the Bank were allowed to continue, largely due to the business he could generate for the Bank. Prior to his onboarding as a client, “40 underage girls had come forward with testimony of Epstein sexually assaulting them,” and despite these allegations, Deutsche Bank remained “comfortable with things continuing.”
In submitting the motion to dismiss, defendants presented a number of arguments that Pomerantz defeated. For example, defendants argued that Deutsche Bank’s representations to investors about their Know Your Customer procedures were aspirational and immaterial and that, in any event, the investing public was provided with more than enough information to understand the state of Deutsche Bank’s AML and KYC processes (the so called “truth-on-the-market” defense). Pomerantz successfully countered that defendants’ representations were material to investors because, by exempting PEPs and other high-risk individuals from any meaningful KYC procedures, the risk to the Bank’s reputation and the risks of criminal and civil liability were significantly heightened. The materiality of defendants’ statements was also demonstrated by defendants’ repeated discussion of these topics throughout the Class Period. Pomerantz successfully defeated defendants’ “truth-on-the-market” argument that investors knew Deutsche Bank’s AML procedures were not always effective, explaining that such defense on this record was intensely fact-specific and improperly raised at the motion to dismiss stage, particularly given Deutsche Bank’s affirmative representations of compliance made throughout the Class Period.
Pomerantz’s Deutsche Bank litigation was led by partners Jeremy A. Lieberman, Emma Gilmore and Gustavo F. Bruckner, with attorneys Dolgora Dorzhieva and Villi Shteyn.
Karimi v. Deutsche Bank AG, 1:22-cv-02854 (S.D.N.Y.)
Class Period: March 14, 2017 to May 12, 2020, both dates inclusive
For violations of the Securities Exchange Act of 1934