12 May 2009

An amazing insight into the Agency and Incentives problem at Banks; Deutsche Bank in this instance

What I have discovered is an ever-developing, very intricate story, with potentially substantial ramifications not only for one specific company's internal corporate policy and potential abuses thereof, but additionally having significant political implications, as well as explaining a lot in terms of recent oddities in terms of Mark-To-Market, mainstream media interactions with sensitive Wall Street clients, and lastly, shedding some much needed light on that most thorniest of recent subjects - the commercial real estate bubble.

First some background. Mr. Moorjani, contrary to what Zero Hedge represented, is still technically an employee of Deutsche Bank Japan, specifically their Commercial Real Estate department, despite being already involved in several years of litigation with the company. We provide his relevant biography compliments of The Huffington Post:
Deepak Moorjani is an employee and shareholder of Deutsche Bank AG. The views expressed herein are his own and do not necessarily represent the views of Deutsche Bank AG. As disclosure, he is presently involved in litigation as a plaintiff and as a defendant with Deutsche Securities Inc, a subsidiary of Deutsche Bank AG.
The reason Mr. Morjani is still employed at DB Japan is that in Japan the concept of at will employment does not exist. His status as an employee would end when either (i) he resigns or (ii) the courts officially recognize a valid termination by the company. So far, neither has happened. Indeed, DLA Piper chimes in on the topic: "Japanese labor laws tend to be very labor friendly, especially when compared to the labor laws from other Asian jurisdictions and countries such as the United States. There is no concept of "at-will" employment in Japan and the employer's right to terminate, transfer and discipline employees is limited by statute, case law and custom."

As some more background, in April 2007 Mr. Moorjani sent a due diligence report to DB's head of global banking, Michael Cohrs, in which he detailed numerous observations from a whistleblower's perspective. The company's retort was the pursue litigation against Mr. Moorjani, which has since escalated over the past two years. I will not focus as much on the details of the lawsuits, however I do provide links to documents which are public domain and have been filed in Japanese court for whoever desires to conduct additional an drill-down on this topic. A full overview of the background of the Moorjani-case can be gleaned from the following set of documents, posted by Mr. Moorjani on his Scribd account.


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