(Bloomberg) -- Deutsche Bank AG was sued by Colin Fan, the former co-head of its investment banking unit, for at least 10 million pounds ($13 million) over unvested share awards the lender said were canceled after a probe into personal trades that breached conflict-of-interest rules.
Details about Fan's case were disclosed in a short claim form from July and the lender's Sept. 29 defense documents that were released Friday. The suit, initially filed in London in January, criticizes the internal bank review of the trades and the decision to revoke the award of the unvested shares more than a year after he had left Deutsche Bank in November 2015.
The dispute is a window into Deutsche Bank, one of the world's biggest lenders, since the ascent of John Cryan to chief executive officer and the departure of managers led by his predecessor, Anshu Jain. The CEO has pledged to improve the firm's internal controls after a series of misconduct scandals saddled it with billions of dollars of losses and a tarnished reputation.
Deutsche Bank said that Fan had to forfeit the bonus payments because of the disputed investments in a series of credit index-linked structured notes that the bank was involved in issuing. Two top executives, chief administrative officer Karl Von Rohr and chief risk officer Stuart Lewis, informed their former colleague of the bank's decision in a letter last December, the documents show.
Forfeiture Warranted
“He had breached the bank's policies and code of conduct,” Deutsche Bank claimed. “Forfeiture of his unvested awards was warranted.”
Fan, 44, and his lawyers at Mishcon de Reya didn't immediately respond to requests for comment. Fan's documents containing his full legal arguments weren't available from the court.
Deutsche Bank declined to comment on the lawsuit.
The trades by a half dozen employees sought to profit from differences in prices of credit indexes and the underlying debts that compose them, a person familiar with the trade said at the time of the bank investigation in 2016. Fan may have stood to reap $9 million on a roughly $1 million investment, the person said.
Harvard
Fan, born in Beijing, rose swiftly under his mentor Jain to become one of the most senior executives at Deutsche Bank's securities unit. By 2009, when the scrutinized deals began, the Harvard graduate was global head of credit trading and later became co-head of the overall investment bank division.
“Our reputation is everything,” Fan warned Deutsche Bank employees in an internal video in 2014 amid mounting probes into misconduct at the lender's securities unit. “Some of you are falling way short of our established standards.”
Although the reason for his departure isn't disclosed, the bank's defense documents point out that Fan was terminated rather than resigned.
“The claimant's employment with the first defendant terminated on Nov. 6, 2015,” the bank said in court documents. “The claimant did not resign.”
Deutsche Bank has completed its internal probe of the trades, Boersen-Zeitung reported earlier this month. The U.K.'s Financial Conduct Authority dropped its own investigation a year ago, according to the lender's court filing.
Fan is also suing the bank for failing to indemnify him and pay his legal costs during the FCA probe.
Cryan, who at the time was co-chief executive officer, was aware of the transaction prior to October 2015 and told Fan that it wasn't a "determinative factor" when opting not to appoint him to the bank's management board, the bank's lawyers said.
Deutsche Bank also denied leaking an internal audit of the trade to a journalist.
Fan was hired by Softbank Group Corp., the Tokyo-based technology firm, earlier this year, Bloomberg reported. Several other ex-Deutsche Bank executives who worked under Jain have helped company founder Masayoshi Son run his $93 billion Vision Fund, which will make technology investments.
The case is Colin Fan v. DB Group Services (UK) Ltd. in the U.K. High Court of Justice, Queen's Bench Division case no. HQ17X00359
To contact the reporters on this story: Jeremy Hodges in London at jhodges17@bloomberg.net, Donal Griffin in London at dgriffin10@bloomberg.net.
To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Ambereen Choudhury
©2017 Bloomberg L.P.
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