DeAM failed to tell its clients that the company’s investment banking division was working for H-P, which paid Deutsche Bank $1 million for “market intelligence” during H-P’s proxy battle in its takeover of Compaq Computer, with another $1 million contingent on the deal’s success. However, the SEC found no evidence that Deutsche Asset Management’s vote on the proposed acquisition was affected by the investment bank’s relationship with H-P, according to the Associated Press. The SEC launched the investigation last year (see SEC H-P Merger Probe Reported ).
Deutsche Bank agreed to pay the $750,000 fine but did not admit or deny the SEC’s findings. The firm said in a statement that “even before today’s settlement, we voluntarily strengthened our policies regarding information barriers
At first during the intense sparring over the proposed acquisition, DAM voted 17 million HP shares held by its clients against the Compaq acquisition. But the votes were switched in favor of the deal after a last-minute pitch by HP’s top two executives. The SEC noted that HP’s pitch came after senior executives in Deutsche Bank’s investment banking arm contacted top members of the asset-management division, who then agreed to hear HP’s side again. When Deutsche asset managers were reconsidering their vote, they were told about the investment banking unit’s relationship with HP, the SEC said.
A short time later, on the morning HP held its shareholder vote on the Compaq acquisition in a Silicon Valley auditorium, Deutsche Asset Management cast the 17 million shares in favor of the deal.
HP’s purchase of Compaq was approved 59%to 49%, making it one of the closest proxy contests in years. The winning margin was 45 million votes, so Deutsche’s switch did not affect the outcome ( H-P Claims Victory (Again) in Shareholder Tally ). Even so, it led to some of the most intriguing moments in the vicious battle over the deal, which was opposed by heirs of HP founders William Hewlett and David Packard (See Judge Dismisses Hewlett Suit Despite ‘Concerns’ ).
At one point, after the deal won initial approval but was being challenged in court by Walter Hewlett, a pre-vote voice mail from HP head Carly Fiorina to chief financial officer Bob Wayman surfaced in which Fiorina had suggested they do something “extraordinary” for Deutsche Bank and another firm (See H-P’s Fiorina Explains Deutsche Remark ).