Exclusive: Commerzbank settlement with U.S. postponed amid probe

Thu Oct 16, 2014 4:09pm EDT
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By Karen Freifeld

NEW YORK (Reuters) - Commerzbank AG's (CBKG.DE: Quote) settlement with U.S. authorities over alleged sanctions violations has been postponed, possibly until the end of the year, as prosecutors seek to coordinate the resolution of a separate probe stemming from transactions at the German bank connected to the massive Olympus Corp (7733.T: Quote) accounting fraud, according to people familiar with the matter.

Commerzbank had been primed to settle with U.S. regulators and prosecutors by the end of September over its dealings with Iran and other countries under U.S. sanctions, Reuters has reported.

The sanctions settlement was expected to cost the bank about $650 million, people familiar with the deal have told Reuters, and the bank had been expected to enter into deferred prosecution agreements with prosecutors that would suspend criminal charges.

But the accord was put on ice after the Manhattan U.S. Attorney's office, which is not involved in the sanctions deal, looked into the bank's records in connection with the $1.7 billion accounting fraud at Japan's Olympus, said two sources who did not want to be identified. Other people with knowledge of the matter did not dispute the reasons for the delay.

The total amount for a coordinated settlement is now expected to cost Commerzbank more than $650 million, one of the two sources said, but the person did not provide a new estimate.

Media outlets have previously reported that a probe related to lax money-laundering controls could delay Commerzbank's sanctions related settlement, but the Olympus connection has not been revealed, nor the new target for a settlement date.

Representatives for the Manhattan U.S. Attorney's office and Commerzbank declined to comment.

The Olympus fraud is considered one of the biggest corporate scandals in Japan's history. In 2011, the camera and medical equipment maker admitted the company used improper accounting to conceal massive investment losses over more than a decade and restated years of financial results.   Continued...

The headquarters of the Commerzbank AG is pictured before the bank's annual news conference in Frankfurt February 13, 2014. REUTERS/Ralph Orlowski