Christian Sewing Accused of Overseeing Flawed Internal Review Linked to Convicted Banker’s Prosecution

Frankfurt – Deutsche Bank chief executive Christian Sewing has found himself at the centre of a high-stakes legal battle, as a former senior banker accuses him of presiding over a flawed internal audit that contributed to a decade-old conviction. The civil lawsuit, filed by Dario Schiraldi in Germany’s Frankfurt Regional Court, seeks €152 million in damages, alleging that Sewing’s 2013 review of Monte dei Paschi di Siena (MPS) transactions was manipulated to shield the bank—and derail Schiraldi’s career.

Schiraldi, once a rising star in Deutsche Bank’s asset and wealth management division, was among six employees blamed by the audit for complex derivatives trades with Italy’s third-largest lender. Those trades, designed to mask MPS’s losses during the global financial crisis, later became the focus of criminal proceedings in Milan. Convicted in 2019 of market manipulation, Schiraldi was sentenced to 18 months in prison before being acquitted on appeal in 2022. His lawsuit contends that the internal audit—overseen by Sewing, then head of group audit—provided key evidence to Italian prosecutors.

According to court filings, the audit report submitted by Deutsche Bank to Italy’s central bank, Banca d’Italia, and German regulator BaFin, painted an unduly damning portrait of Schiraldi and his colleagues. Internal documents reviewed by legal counsel Grant Thornton in 2020 later described the audit as “opaque and incomplete,” with “key findings” that contradicted the bank’s own disciplinary appeals panel. Schiraldi alleges that Deutsche Bank knowingly misled regulators to protect senior executives and avoid greater scrutiny of its own balance sheet treatments.

Representatives for Deutsche Bank have defended the integrity of the audit process. In a statement, the bank noted that it “fully complied with regulatory obligations” and that any discrepancies were unintentional. “It is completely implausible to suggest that Deutsche Bank orchestrated criminal proceedings against its own employees for ulterior motives,” said a spokesperson. The bank’s annual report lists Schiraldi’s claim as “without merit,” estimating that his alleged losses are “inflated and unrealistic.”

For Sewing, the lawsuit represents an unexpected reputational threat. Since taking the helm in April 2018, he has steered Deutsche Bank through a complex turnaround—trimming costs, boosting profitability, and distancing the lender from past scandals, including a $10 billion money-laundering settlement. Analysts say Sewing’s leadership has been pivotal in restoring investor confidence. Yet, the prospect of protracted litigation and scrutiny over his tenure as head of audit could tarnish that hard-won image.

Legal experts caution that Germany’s civil court may provide Schiraldi an avenue for redress that eluded him in Italy. “Schiraldi will need to prove that the audit findings were knowingly false and that Sewing was complicit,” noted Dr. Sabine Weber, a Frankfurt-based corporate law specialist. “If he succeeds, the damages awarded could surpass the €152 million sought, given punitive factors.” The case is expected to hinge on internal emails, audit methodology, and testimonies from regulators and Deutsche Bank executives.

The MPS derivatives scandal itself has a long and tangled history. Between 2008 and 2012, Monte dei Paschi engaged Deutsche Bank in a series of bespoke financial contracts—nicknamed “Santorini trades”—intended to smooth over balance-sheet shortfalls. Italian prosecutors argue that these trades amounted to an improper attempt to conceal losses, while Deutsche Bank counters that it acted in good faith as a service provider. The Italian appellate court overturned initial convictions for Schiraldi and others, citing procedural irregularities and insufficient evidence—a decision later upheld by Italy’s Supreme Court of Cassation in 2023.

Beyond the courtroom, the lawsuit raises broader questions about corporate governance and accountability. Deutsche Bank’s audit division, under Sewing, was tasked with safeguarding the bank’s integrity during an era of intense regulatory pressure. Critics argue that the audit’s shortcomings reveal a culture of deference to senior management—a charge Sewing vehemently denies. In an internal memo circulated in 2014, he wrote that “audit must serve transparency, not corporate expediency,” a sentiment echoed in his public remarks as CEO.

Industry observers say the Frankfurt lawsuit could encourage other former employees to pursue similar claims. Deutsche Bank’s annual disclosures indicate that at least five additional ex-staff involved in the MPS affair are considering or preparing lawsuits in various jurisdictions. If multiple suits move forward, the cumulative financial and reputational costs could weigh heavily on the bank’s balance sheet and management focus.

As the legal battle unfolds, Deutsche Bank shareholders will be watching closely. The bank’s shares traded 1.2% lower on the day news of the lawsuit broke, reflecting market jitters over potential liabilities. In recent investor calls, Sewing has emphasized the importance of “closing past chapters” and maintaining “robust risk and audit frameworks.” Yet, opponents claim that revisiting the 2013 audit may expose deeper lapses in internal controls—raising fresh regulatory eyebrows in Frankfurt, London, and beyond.

The Frankfurt Regional Court has set an initial hearing for late autumn, marking the first public showdown between Schiraldi’s legal team and Deutsche Bank’s defence. For Schiraldi, the suit offers a chance at vindication after years of legal limbo; for Sewing, it presents a test of his commitment to principled leadership and transparent oversight. In a case where past actions meet present accountability, the outcome could reshape Deutsche Bank’s approach to audit governance and corporate responsibility.

Whether Sewing can emerge unscathed remains uncertain. As Germany’s top lender braces for one of its most consequential trials in years, the case underscores a timeless lesson: in the world of high finance, the echoes of past decisions may reverberate far longer—and cost far more—than anyone anticipated.