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(Financial Times) -- Deutsche Bank failed to recognise up to $12bn of paper losses during the financial crisis, helping the bank avoid a government bail-out, three former bank employees have alleged in complaints to US regulators.
The three complaints, made to regulators including the US Securities and Exchange Commission, claim that Deutsche misvalued a giant position in derivatives structures known as leveraged super senior trades, according to people familiar with the complaints.
All three allege that if Deutsche had accounted properly for its positions -- worth $130bn on a notional level -- its capital would have fallen to dangerous levels during the financial crisis and it might have required a government bail-out to survive.
Instead, they allege, the bank's traders -- with the knowledge of senior executives -- avoided recording "mark-to-market", or paper, losses during the unprecedented turmoil in credit markets in 2007-2009.
Two of the former Deutsche employees have alleged they were pushed out of the bank as a result of reporting their concerns internally.
One of them, Eric Ben-Artzi, a risk manager at Deutsche, was fired three days after submitting a complaint to the SEC. In a separate complaint to the Department of Labor, he claims his dismissal was retaliation for his allegations.
Matthew Simpson, a senior trader at Deutsche, also left the company after submitting his own complaint to the SEC. Mr Simpson declined to comment. Deutsche Bank paid Mr Simpson $900,000 to settle his anti-retaliation lawsuit. Reuters reported in June 2011 that Mr Simpson had raised concerns about improper valuation of the derivatives portfolio.
The third complainant, who worked in risk management and has requested anonymity, raised his concerns to the SEC and voluntarily left the bank.