Deutsche Bank (XE:DBK)
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2 Months : From Oct 2019 to Dec 2019
By Jenny Strasburg
Deutsche Bank AG officials approved the sale of a chunk of Silicon Valley real estate to a Russian businessman despite objections from its U.S. reputational risk committee, according to documents and people familiar with the matter.
The lender's Germany-based global reputational risk committee approved the $72 million deal in May 2018, overruling concerns raised by executives including the one responsible for Deutsche Bank's U.S. anti-money-laundering controls, the people said. He has since left the bank.
The transaction, which was championed by its real-estate team, occurred at a time when Deutsche was under scrutiny by members of Congress over its Russian business relationships.
Deutsche Bank continues to hand over documents to Congress in a probe of money-laundering controls and longtime links with Russian companies and oligarchs. A U.S. Justice Department investigation into aspects of those Russia relationships and the bank's handling of internal red flags is ongoing, according to people close to the bank and its interactions with investigators.
Spokesmen for Deutsche Bank and its asset-management arm, DWS, said the business was acting as a fiduciary for fund investors. They said the deal went through the bank's processes to prevent money laundering and other financial crimes by clients. The deal didn't involve financing from Deutsche Bank, they said.
"Consistent with our policies and procedures extensive due diligence was conducted on this transaction and involved, among others, the [anti-financial crime] unit of Deutsche Bank. Additionally, the transaction was made subject to the reputational risk assessment procedures in place at that time," a spokesman for DWS said.
The bank identified no evidence the deal "would violate money laundering or sanctions laws. As a result, the discussion of whether to move forward with the transaction was focused on reputational considerations, " a spokesman for Deutsche Bank said.
"There are processes in place that govern reputational risk considerations, and regional and global judgments about these considerations can differ, as occurred in this instance," the Deutsche Bank spokesman said.
Deutsche Bank is one of Wall Street's most troubled operators, hamstrung by a legacy of aggressive lending practices and regulatory lapses. The bank has paid large fines for failures to police money coursing through its network, including transactions that moved billions of dollars out of Russia. The bank is currently going through a painful downsizing.
Deutsche Bank's asset management arm bought into the property on behalf of clients in 2016. A private Bay Area firm called Embarcadero Capital Partners also held a joint stake, according to the companies.
The 6.6-acre property is located at 80 Willow Road in Menlo Park, Calif., featuring a single-story office complex with Spanish-colonial adobe and midcentury modernist design and expansive gardens. It was built in the early 1950s as the headquarters of Time Inc.'s Sunset Magazine, and used by the publisher for offices, photography shoots and public tours for decades.
The buyer was Vitaly Yusufov, Russian financier and son of former energy minister Igor Yusufov, according to documents and people familiar with the matter. He purchased the property through a Delaware registered company, according to internal bank documents and people involved in the sale. Neither Vitaly Yusufov nor his father responded to repeated requests for comment.
Write to Jenny Strasburg at firstname.lastname@example.org
(END) Dow Jones Newswires
October 31, 2019 12:29 ET (16:29 GMT)
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