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Danske Bank, Apple Bill, Chinese Retaliation: CEO Daily for September 19, 2018

Good morning. David Meyer here in Berlin, filling in for Alan.

The CEO of Denmark’s largest bank has fallen on his sword over one of Europe’s worst-ever money laundering scandals.

Danske Bank’s slack controls allowed its Estonian operations to be used for money laundering from 2007 through 2015. That’s the conclusion of investigations that the bank commissioned from an external law firm.

In conjunction with the release of those findings, CEO Thomas Borgen announced his resignation. “It is clear that Danske Bank has failed to live up to its responsibility in the case of possible money laundering in Estonia. I deeply regret this,” he said. “Even though the investigation conducted by the external law firm concludes that I have lived up to my legal obligations, I believe that it is best for all parties that I resign.”

Danske’s Estonian operations came with the purchase of Sampo Bank in 2007. The scale of the money-laundering, which largely involved customers from former Soviet states, appears to have been substantial. Of 15,000 non-resident customers, who made a total of €200 billion ($234 billion at today’s exchange rates) in payments during the period, it seems 6,200 “hit the most risk indicators,” and of these customers’ activities “a significant part of the payments” were suspicious.

The bank has exonerated its board, chairman and CEO of breaching legal obligations, dismissed or reprimanded various employees and managers, and apologized to everyone. While it isn’t sure how much money-laundering took place, it knows it made $235 million from the suspicious customers—and what the authorities don’t confiscate from that sum, Danske will donate to an independent foundation that fights international financial crime.

Does that draw a line under the matter? Not at all.

The Estonian authorities launched a criminal investigation into the money-laundering at the end of July, prompted by a complaint by none other than Hermitage Capital chief Bill Browder, one of the Kremlin’s bêtes noires. Browder reckons much of the laundered cash came from the Russian state, and alleges that dozens of Danske employees in Estonia were linked with organized crime.

Meanwhile, The Wall Street Journal reported Friday that U.S. law enforcement agencies are investigating the affair, following a tip to the SEC from a whistleblower two years ago.

This is an ugly scandal that won’t be going away anytime soon, despite Borgen’s self-defenestration.

More news below.

David Meyer
@superglaze
david@dmeyer.eu

Top News

Apple Bill

Apple has paid off the $16.7 billion it owed to the Irish government because of an illegal tax break. The money is, however, being held in an escrow account while Apple’s appeal runs its course. The European Commission decided in 2016 that Ireland had given Apple unauthorized state aid by allowing it to effectively pay less than 1% in corporate taxes. BBC

Chinese Retaliation

China is hitting an extra $60 billion worth of U.S. imports with tariffs, in retaliation for the White House’s new tariffs on $200 billion worth of Chinese imports. China threatened that figure before, so no surprise there. But, with the U.S. still threatening further tariffs, what does China have left with which to retaliate? Not currency manipulation, Premier Li Keqiang insisted today. “A one-way depreciation will do more harm than good for China,” he said at a World Economic Forum event, denying that China has previously manipulated the yuan exchange rate to deal with trade tensions. South China Morning Post

Benefit vs. Wage Growth

The Labor Department said yesterday that U.S. employers are ratcheting up benefits more quickly than they are salaries—in June, the year-on-year rise for private-sector benefits such as bonuses and vacation time was 3%, while for wages and salaries it was 2.7%. As the Wall Street Journal notes, the tactic allows employers more flexibility to cut costs in an economic downturn. WSJ

Tesla Bear

Former General Motors vice chairman Bob Lutz reckons Tesla is “headed for the graveyard,” and says Elon Musk doesn’t know how to run a car company. “They will never make money on the Model 3 because the cost is way too high. He’s got 9,000 people in that assembly plant producing less than 150,000 cars a year. The whole thing just doesn’t compute,” Lutz told CNBC. The Justice Department, meanwhile, is probing Musk’s infamous “funding secured” tweet. CNBC

Around the Water Cooler

North Korea

North Korean dictator Kim Jong-un has agreed to discuss allowing nuclear inspectors into the country, and to dismantle a test site, and to jointly bid with South Korea for the 2032 Olympics. Experts suggest the move may be enough to keep the denuclearization process “limping along,” albeit without delivering much concrete. President Trump said Kim’s moves were “very exciting.” Bloomberg

Tencent Music IPO

The imminent U.S. stock market flotation of Tencent Music is now reportedly aiming to raise around $2 billion, or half the original goal. Nonetheless, the IPO should be one of the largest in New York by a Chinese company (if it had been $4 billion it would have been the largest.) Reuters

Ford Testimony

Christine Ford, who has accused Supreme Court nominee Brett Kavanaugh of sexual assault, wants the FBI to investigate the decades-old incident before she testifies to the Senate Judiciary Committee (testimony that was due to take place next week.) Ford’s lawyers also say she has been “the target of vicious harassment and even death threats” since going public with her allegation. Kavanaugh, who denies Ford’s claim, has accepted the invitation to testify before the committee. NBC

Fort Trump

Poland has for ages been angling for a permanent U.S. military base in the country, in order to discourage the Russian threat. Now it’s come up with a new tactic to convince the president: proposing that the base be named “Fort Trump.” The naming proposal, made by Polish President Andrzej Duda in a joint press conference with Trump, appeared to be a joke. Washington Post

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.