‘Dark Towers’ exposes chaos and corruption at the bank that holds Trump’s secrets
In the 1990s, long before he became president, Donald Trump was known as a cash-strapped New York businessman with shaky credit.
“His record of defaulting on loans and stiffening his business partners was very long and very well documented,” New York Times says finance editor David Enrich. “Any traditional financial institution that had competent risk management systems in place – there was no way they were doing business with Donald Trump.”
Enter Deutsche Bank, which Enrich said was a “second-tier player” in the banking world in the 1990s. Seeking to make a name for itself, the bank was willing to work with Trump when others wouldn’t. .
“The bank was so greedy for profits, short-term profits, and so greedy to make a name for itself in the United States that it was really eager to ignore any red flags that came up with customers. “, said Enrich. “Trump would default on a bond offer. He would default on a loan. He would sue the bank. And yet, time and time again, Deutsche Bank executives would come back to him for more business.”
Congressional committees have since subpoenaed the bank’s records on Trump — including suspicious activity reports that are typically filed with regulators. Meanwhile, the Trump family has followed the bank to prevent it from complying with the subpoenas it received from these congressional committees.
In total, Enrich estimates that Deutsche Bank loaned Trump some $2 billion, which paved the way for his political rise.
“I think that’s a big part of why Donald Trump is president today, because of the financial support he received for many years from his lender of last resort,” Enrich said.
Enrich spent years reporting on Deutsche Bank, which in 2007 was the largest in the world, with $3 trillion in assets. He traces the bank’s murky practices – which range from laundering money for Russian oligarchs to violating international sanctions – in the new book, Dark towers.
Interview Highlights
On Deutsche Bank’s concerns about Trump’s holding political office
As the top candidate for the presidency of the United States, he is what is known in banking terms as a “politically exposed person”, which means that there is an increased risk of corruption… that this person could be involved in bribes or that his money could come from ill-gotten means. The bank was very wary of doing business with Trump in the run-up to the election and, in fact, rejected[a] requested loan he made in early 2016. …
Inside the bank, compliance officials had reviewed some of the transactions going in and out of Donald Trump’s bank accounts, as well as Jared Kushner’s bank accounts. Kushner was also a large client of Deutsche Bank. And what they were seeing was that the money, in some cases, was flowing to international sources, in some cases to wealthy Russians, which raised a lot of money laundering concerns. Compliance officers within the bank have therefore essentially denounced and declared: these transactions are troubling. We need to report them as suspects to the federal government. And those concerns were kind of elevated to the flagpole level within Deutsche Bank, and the managers and senior executives ultimately decided that, no, those concerns didn’t need to be conveyed to the government or even reported to the government. But within the bank, there was concern that something bizarre was going on in Trump’s bank accounts.
Within the bank, there was great concern that something bizarre was happening to Trump’s bank accounts.
On Deutsche Bank’s ties to the Nazi regime
It was the bank that helped with everything from financing the construction of concentration camps. He helped fund the company that made poison gas. It participated in the “Aryanization” of businesses all over Europe, including in the countries that Germany had conquered. He was selling gold that the Nazis had extracted from the teeth of Jews, selling it internationally to raise hard currency for the Nazis. So it was a bank that was really an important part of the Nazi military machine. Now, in fairness to the bank, this is true for most major German companies that existed then and still exist today. So it’s not that Deutsche Bank was particularly bad during that time – but I don’t think there’s any sanitization of that basic fact: the reality is that they participated in the genocide.
On the transformation of Deutsche Bank in the 1990s
Deutsche Bank went from being completely absent from Wall Street and London to being, almost overnight, one of the main players on the street. Edson Mitchell [who led the bank’s London office] was the one leading this charge, and he was quite an impulsive salesman, very charismatic, very energetic. … Largely by the strength of his personality and the powers of persuasion of having at his disposal a few billion dollars to spend on hiring people, [Mitchell] hired thousands and thousands of people, not just from Merrill Lynch, but really from across Wall Street. What if Deutsche Bank has suddenly become one of the most aggressive places to work on Wall Street.
On how CEO Josef Ackermann’s leadership changed the bank in 2002
[Ackermann] wanted to increase the bank’s profitability by around 600% in two years. It’s crazy. It’s wildly ambitious. [He was] reckless and he was a hangman and he was someone whose staff was very afraid of disappointing him. He could get extremely angry. And sometimes [he’d] blaming subordinates for shortcomings, not only in private, but also in public. So people are really scared to do anything that might incur his wrath. So everyone took it into their heads to make Ackermann’s mandate their personal mission. The whole incentive structure within the bank quickly changed. And the way the bank decided whether or not to grant loans or enter into other transactions for customers also changed. If it wasn’t going to be hugely profitable right now, they just wouldn’t do the job anymore.
We see the consequences, with hindsight, [as] quite predictable, that is to say that the bank will do things that are not in the interest of the customers, but which are in the interest of the bank. And it’s a very straight line, I think, between that mentality and a situation where the bank starts ripping off its customers, manipulating the markets, laundering money, violating sanctions, and so on.
On Deutsche Bank Violating US Sanctions
It’s an international bank and it has a presence, a headquarters in Germany and presences around the world, but because it has a large US operation, it has to adhere to US law, and the law The United States at the time imposed very strict sanctions on Iran, Syria, Myanmar and Libya, among others. But Deutsche Bank wanted to do business in these countries. The fact that they were under sanction, in some ways, increased the value of the services the bank could provide, as there were not many banks willing to provide financial services in those countries.
So they just went ahead and did the trick and they took extraordinary measures to cover up what they were doing. They [engaged] in a practice known as “stripping”, where they removed any reference to, for example, Syrian counterparties they worked with in order to avoid triggering alerts in their US IT systems or with US regulators. And over a period of years, they engaged in billions of dollars in deals with entities that, in the case of Iran in particular, were very closely tied to the Iranian military and were later accused of really helped fund a lot of the terrorism that was going on in Iraq after the Iraq war.
On Deutsche Bank money laundering for Russian customers
Many Western banks were very wary of doing business with these Russians because there was a lot of suspicion. And, in fact, it was true that a lot of that money came from corruption or kleptocracy, things like that. Deutsche Bank was very happy to fill this void.
The money laundering business was very lucrative for Deutsche Bank and it really did all over the world. The biggest places he did that were with Russian clients. And Deutsche Bank has a long and proud history of being one of the few western banks [that has], more or less without interruption, has been operating in Russia for a very long time. And Russia in the early 2000s was a place where a lot of people were getting very rich very quickly, often by suspicious means. It became very important for them to have a way to get their money out of Russia and convert it from rubles to euros, dollars or pounds. … Many Western banks were very wary of doing business with these Russians because there was a lot of suspicion. And, in fact, it was true that a lot of that money came from corruption or kleptocracy, things like that. Deutsche Bank was very happy to fill this void. He organized a number of workarounds for Russians where they could either transfer their money to a country like Latvia, for example, and then have it transferred to the United States.
On the chaos at the Deutsche Bank office in Jacksonville, Florida, which analyzes suspicious transactions
It was a place where they had thousands and thousands of staff trained to look for potentially suspicious transactions involving money laundering, tax evasion, corruption, things like that. In any bank, this is one of the operations, if not the most important, to prevent a bank from getting into trouble and breaking the law. And the Deutsche Bank operations there were a catastrophic mess.
I spoke to probably 20 people who were there now or before, and without fail each one of them told me that they had never worked in such a messed up institution as Deutsche Bank. The reason it’s screwed up, in this case, isn’t that their employees aren’t good at what they do. [The company] basically set them up to fail. Their technological systems were completely obsolete. People weren’t properly trained in some cases. But more than that, there’s tremendous pressure from their superiors to process deals as quickly as possible, and the less fuss you make about a particular deal, the better. There is tremendous pressure to get deals done, as one person told me. It’s obviously against the idea of doing a good job, looking closely and being really careful about who you do business with, but that was the Deutsche Bank way of doing it.
Sam Briger and Mooj Zadie produced and edited the audio for this interview. Bridget Bentz, Molly Seavy-Nesper and Meghan Sullivan adapted it for the web.
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