Deutsche Bank sues ex-managers in $636M Monte Paschi spat

Deutsche Bank AG is seeking damages from four former senior employees who claim the lender wrongly blamed them for alleged involvement in the Banca Monte dei Paschi di Siena SpA accounting scandal.

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The German lender denies allegations that it orchestrated a years-long effort to scapegoat them over the affair and has now hit back with a counterclaim, according to a court filing seen by Bloomberg.

“These allegations are baseless and denied,” the lender’s lawyers said in a court filing. The bank denied conspiring against its former employees, saying their convictions and subsequent acquittals were the result of Italian courts’ interpretation of accounting rules and had nothing to do with the lender’s “acts or omissions.” 

Michele Faissola, the former head of Deutsche Bank’s asset and wealth management business, sued Deutsche Bank last year for £473 million ($636 million) in London, along with three former colleagues: Ivor Scott Dunbar, the former co-head of global capital markets; Matteo Angelo Vaghi, who previously led the bank’s Italian sales operation; and former account manager Marco Veroni. 

At the center of the dispute is more than a decade-old internal audit report reviewing the accounting treatment of repo transactions between Deutsche Bank and the Italian lender. The four argued that the review wasn’t handled neutrally and unfairly pinned the blame on them.

Lawyers for Deutsche Bank claim the four breached earlier settlement agreements and an agreement not to use certain documents disclosed during earlier litigation. The lender has also sought the return of more than £4 million paid to Faissola under a previous settlement agreement, along with damages from Dunbar. 

“Far from deflecting blame from senior management or DB Finance, the Group Audit investigation considered the actions of all relevant actors, including the Management Board, DB Finance and DB Legal,” lawyers for the bank said in the latest court filing. “It was conducted independently,” they said.

In the Italian criminal case, Monte dei Paschi managers were accused of colluding with Deutsche Bank staff to hide losses at the Italian lender by using complex derivative trades, leading to a misrepresentation of the firm’s finances between 2008 and 2012. The former Deutsche Bank employees were also charged with market manipulation. Six Deutsche Bank staffers were fully acquitted in 2022 by a Milan appeals court. In October 2023, Italy’s Supreme Court upheld the acquittal. 

A Deutsche Bank spokesperson declined to comment.

“The claimants remain confident in their position and will robustly assert their claim in the High Court,” a spokesman for the four former employees said.