personal finance

Ex-Deutsche Bank executive in $500,000 subprime settlement


A former Deutsche Bank executive has agreed to pay $500,000 to settle civil claims made by the US Department of Justice that he misled investors in 2007 into buying securities backed by defective mortgages.

Paul Mangione, a former head of subprime mortgage trading at the German lender, was sued in 2017 in connection with the sale of $1.4bn of residential mortgage-backed securities after the bank had agreed a related settlement.

Under the deal announced on Thursday, the DoJ will drop its lawsuit in return for a $500,000 payment by Mr Mangione, who did not admit any liability or wrongdoing.

In 2017, the DoJ accused him of contributing to “hundreds of millions of dollars” in investor losses from the two securities. Deutsche Bank itself agreed to pay $7.2bn to resolve claims about securities it sold in the lead-up to the financial crisis.

“This office’s settlement with a bank executive in connection with RMBS fraud reflects our commitment to holding individuals accountable for their role in corporate fraud,” said Richard Donoghue, US attorney for the eastern district of New York.

Patrick Smith, Mr Mangione’s lawyer, said his client had settled the case because “his time, energy and resources are better spent engaging in more productive areas of his life”. He said his client “did nothing wrong” and had “acted in good faith” during his time at Deutsche Bank.

“Mr Mangione was not responsible for Deutsche Bank’s RMBS practices and disclosures to investors, which were at the core of the government’s claims against him. Mr Mangione is pleased that the government capitulated in its attempt to prove otherwise.”

Deutsche Bank declined to comment.

The settlement wraps up one of the few outstanding subprime mortgage-related cases stemming from the 2007 and 2008 financial crisis. The DoJ has brought a series of lawsuits under the Financial Institutions Reform, Recovery and Enforcement Act, winning billions of dollars in penalties from big banks.

Last year, the US attorney’s office for the eastern district of New York brought a fresh case under the act against UBS. The Swiss bank has denied the claims and is contesting the lawsuit.

Additional reporting by Laura Noonan.



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