Revolving Door

SEC and Revolving Doors: Q&A with Eric Ben-Artzi, the Deutsche Bank Whistleblower Who Rejected a Multimillion Dollar Award

ProMarket interviews Eric Ben-Artzi, the former Deutsche Bank risk officer turned whistleblower who rejected an $8.25 million award from the SEC. 

In May 2015, Deutsche Bank agreed to pay a $55 million fine to the Securities and Exchange Commission to settle charges that it inflated the value of its complex derivatives portfolio during the height of the financial crisis. The settlement was the conclusion of a five-year investigation, which was largely spurred by revelations made by three former Deutsche employees turned whistleblowers that the bank had overvalued its derivatives portfolio in order to hide potential trading losses. Last week, whistleblower and former Deutsche Bank risk officer Eric Ben-Artzi caused a media sensation when he publicly rejected an $8.25 million award from the SEC due to the agency’s failure to punish Deutsche’s executives.

“Revolving Doors,” the habit of executives and regulators going back and forth between government jobs and regulated industries, has attracted increasing attention since the financial crisis.

The incestuous relationship between regulators and the industry they are tasked with supervising is considered by many as one of the main reasons for “regulatory capture”–the failure of regulation in addressing market failures, and, in many cases, the designing of regulation that benefits incumbents and subverts competition.

Eric Ben-Artzi, a whistleblower who exposed a major case of accounting fraud by one of the biggest financial institutions in the world, chose a very unique way bring attention to the revolving door. Last week he announced, in the pages of the Financial Times, that he is renouncing his share of a $16.5 million SEC whistleblower award because of what he describes as corrupt behavior by the SEC’s senior leadership in deciding not to go after the executives, but rather charge only the bank itself.

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