Current Report — Form 8-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 8-K Current Report 5 13K
2: EX-99.1 Press Release Dated March 11, 1999 2 9K
3: EX-99.2 Cooperation and Plea Agreement Dated March 11, 199 10 35K
4: EX-99.3 The Information Dated March 11, 1999 12 25K
5: EX-99.4 New York State Banking Department News Release 4 17K
6: EX-99.5 Written Consent Under Agreement and Plan of Merger 1 8K
EX-99.2 — Cooperation and Plea Agreement Dated March 11, 199
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[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
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
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.
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
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
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
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
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
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
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
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
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| This ‘8-K’ Filing | | Date | | First | | Last | | | Other Filings |
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| |  |
| | 5/12/99 | | 2 |
| Filed on: | | 3/12/99 |
| For Period End: | | 3/11/99 | | 1 | | 10 |
| | 2/9/96 | | 8 |
| | 6/30/94 | | 7 | | | | | 10-Q |
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