A former head of subprime trading at Deutsche Bank will have to cough up half a million dollars to settle allegations of mortgage fraud.
Paul Mangione, former managing director and head of subprime trading at Deutsche Bank, will pay $500,000 dollars in civil penalties to settle a federal complaint over the bank’s marketing and sale of $1.42 billion in residential mortgage-backed securities in 2007, according to the Justice Department.
Mangione was charged in 2017 with mail fraud, wire fraud and conspiracy to commit wire and mail fraud. The charges came shortly after Deutsche Bank reached a $7.2 billion settlement – including a $3.1 billion civil fine – with the US government. As part of the settlement, the bank admitted to misleading investors about the mortgage-backed securities it sold, according to a Reuters report.
The Justice Department alleged that Mangione engaged in a scheme to defraud investors in two mortgage-backed securities. Authorities said that Mangione lied to potential investors about the loan origination practices of Deutsche Bank’s wholly owned subsidiary, DB Home Lending, which originated more than half of the loans backing the two RMBS. Mangione allegedly lied about whether the loans were underwritten properly and borrowers’ ability to repay, according to Reuters.
“This office’s settlement with a bank executive in connection with RMBS fraud reflects our commitment to holding individuals accountable for their role in corporate fraud,” said US Attorney Richard P. Donoghue.
Mangione, however, did not admit to wrongdoing as part of the settlement. His lawyer, Patrick Smith, told Reuters that Mangione settled the case in order to devote his time and energy elsewhere.
“Mr. Mangione did nothing wrong during his time at Deutsche Bank,” Smith said in a statement. “He acted in good faith in performing his customary job functions as a whole-loan trader at Deutsche Bank. Mr. Mangione was not responsible for Deutsche Bank’s RMBS practices and disclosures to investors, which were at the core of the government’s claims against him.”