<PAGE>
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
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(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
--------------
<PAGE>
Item 5. OTHER EVENTS
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(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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
[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
<PAGE>
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
<PAGE>
[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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
<CAPTION>
COUNT APPROX. DATE FRAUDULENT ENTRY
- ----- ------------ ----------------
<S> <C> <C>
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."
</TABLE>
(Title 18, United States Code, Sections 1005 and 2.)
/s/ Mary Jo White
----------------------
MARY JO WHITE
United States Attorney
12
<PAGE>
[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.
# # #
<PAGE>
[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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
----------------------------------
