Deutsche Bank hired law firm Fried Frank Harris Shriver & Jacobson LLP in March 2010 to conduct an internal probe days after a trader alleged the bank had misrepresented the value of derivatives to mask paper losses during the financial crisis.
Bloomberg reports that the law firm found no wrongdoing, Deutsche Bank Chief Financial Officer Stefan Krause told analysts and investors on a conference call today. While Fried Frank found limitations to the bank’s model, no adjustments to valuations were needed and the company switched to a new model in early 2010, Krause said.
Questions about how Frankfurt-based Deutsche Bank valued the assets resurfaced last week when a former quantitative risk analyst at the bank, Eric Ben-Artzi, said the lender hid losses, helping it avoid state aid at the height of the financial crisis. Deutsche Bank rejected the allegations, which related to a portfolio of collateralized insurance agreements that protected against the risk of corporate defaults.
The lawyers from Fried Frank met with dozens of witnesses and spent several days with the trader for the credit correlation desk, as well as auditors, and reviewed millions of documents, said two people with knowledge of the probe, who asked not to be identified because the matter is private. Deutsche Bank reported the trader’s allegations to the U.S. Securities and Exchange Commission in June of 2010, according to the people.