March 12, 1999

Major Business News

Bankers Trust Agrees to Pay Fine
Of $60 Million in Federal Case

By RANDALL SMITH and FRANCES A. MCMORRIS
Staff Reporters of THE WALL STREET JOURNAL

NEW YORK -- Bankers Trust Co. agreed to pay a $60 million criminal fine
and plead guilty to three felony counts for an unusual scheme by former
employees and officials to divert $19.1 million in unclaimed customer funds to
boost the bank's performance.

Mary Jo White, U.S. Attorney for the Southern District of N.Y., said in
announcing the plea agreement that the large size of the fine was based partly
on "the amount, duration, and motivation of the wrong-doing by high-level
management officials and employees of Bankers Trust." It said senior managers
who headed the client-processing services division "brazenly used such funds as
a 'slush fund' to meet the bank's earnings goals."

The employees weren't named, and the federal prosecutors refused to comment
on whether individual bank executives or employees would soon be charged.
Ms. White said the guilty plea should signal to other corporate executives that
"negative consequences will flow from putting pressure on their executives and
employees to generate revenues and meet expense targets with any means
necessary."

In a press release, Ms. White said that from 1994 to 1996, officers and
employees of client-processing services, "including a partner and a managing
director of Bankers Trust, devised a scheme to unlawfully divert millions of
dollars in unclaimed customer checks and customer credits into Bankers Trust's
income and reserve accounts, in order to falsely enhance Bankers Trust's
financial performance."

The release said the employees falsified the records to conceal the diversion
from bank regulators "in order to meet internal and external financial pressures
at Bankers Trust to meet revenue and expense targets."

In its own release, the bank said it discovered the activities in March 1996, and
reported them to prosecutors, bank regulators, its board and auditors. The
bank also released a statement by a spokesman for Deutsche Bank AG saying
the German bank, which is planning to acquire Bankers Trust for about $10
billion, still "looks forward to consummating the merger."

The bank also said it will pay a separate $3.5 million fine to the state of New
York. It has also promised to submit to the Federal Reserve its beefed-up
internal audit and compliance procedures to prevent a recurrence of such
misconduct.

David D. Brown IV, a managing director and in-house lawyer at Bankers
Trust, appeared at about 7 p.m. Thursday before U.S. District Court Judge
John G. Koeltl to plead guilty on behalf of the bank to three counts of making
false entries in bank books and records. Mr. Brown said that a resolution
authorizing the guilty plea was signed Thursday by the bank's board.

In a prepared statement, he told the court that the transactions occurred in the
Client Processing Services business of the bank, which provided processing,
fiduciary and trust services to clients and customers of the bank. "At any given
time," he said, "there is a small percentage of the funds processed by CPS that
are unclaimed or whose rightful owners are unidentified."

The false entries occurred between January 1994 and March 1996 and were
carried out by a group of executives and employees of the bank, who are no
longer employed there, Mr. Brown said.

"Although this group of employees included the senior manager and the
controller of the business unit, the bank believes that a small number of CPS
employees were involved in the knowing falsification of the bank's records,"
Mr. Brown said. "The falsification of the bank's records arose in connection
with improper transfers of unclaimed funds to reserve accounts and to the
bank's incomes."

The first felony count relates to a false entry on June 30, 1994 -- an automated
journal ticket reflecting the cancellation of about $2.4 million in outstanding
Corporate Trust and Agency Group checks as "movement of funds."

The second count was a phony entry on May 24, 1995, in which a journal
ticket identifying the cancellation and movement to a Bankers Trust reserve
account of $946,610.48 in outstanding Retirement Services Group checks
were entered as "OCS reclass."

In count three, a phony entry on Feb. 9, 1996, was a reserve-account schedule
reflecting $3.9 million in Global Securities Services Credits entered as
"beginning reserve balance."

Mr. Brown said that the "bank accepts responsibility for these transactions and
the conduct of its employees. It deeply regrets that its former employees
engaged in such transactions." Mr. Brown added that the bank changed the
management of that business unit when it discovered the improprieties. "The
bank has reversed all of the transactions and has, or is in the process of,
compensating any customers or third parties affected by these transactions."

In its plea-agreement letter, the bank agreed that the total amount of unclaimed
funds unlawfully recorded as income or reserves, including an unlawful transfer
of $1.3 million in outstanding customer checks in 1989, is $19.1 million.

The plea agreement also gives the bank a two-month delay in sentencing until
May 12 to permit other regulatory agencies to evaluate the bank's request for
approval to continue to engage in certain businesses.

The bank has agreed to continue to cooperate in the government investigation.
The plea states the government still can go after the bank for criminal tax
violations.