(CN) - Three former Deutsche Bank AG employees told the SEC that the German bank improperly reported the real value of its credit derivatives portfolio during the financial crisis to hide $12 billion in losses.
As part of the improper reporting, the bank allegedly mis-valued insurance provided by Berkshire Hathaway, the firm led by billionaire Warren Buffett, the Financial Times reported.
The total value of Deutsche Bank's credit derivatives portfolio was $130 billion.
The whistleblowers reported the possible securities violations through the SEC's new whistleblower program, established by the Dodd-Frank Act. The program received more than 3,000 tips in its first year of operation.
One of the whistleblowers, Dr. Eric Ben-Artzi, a former Quantitative Risk Analyst at Deutsche Bank, says that he attempted to work through internal controls to correct the valuation problem.
As a result of his efforts, he claims he was subjected to severe hostility, was stripped of his job responsibilities, and was fired immediately after returning from paternity leave, according to his retaliation complaint filed with the Department of Labor.
"I never wanted or expected to be a whistleblower. I reported internally first and extensively, in accordance with bank policies and procedures. As the problem was not acknowledged or corrected, I felt compelled to inform the proper law enforcement authorities. Unfortunately, my family and I are paying a heavy price for doing the right thing," Ben-Artzi said in a press release .
He says that Deutsche Bank failed to accurately valuing its credit derivative portfolio "to maintain its carefully crafted public image that it was weathering the financial crisis better than its peers - many of which required financial assistance from the government and experienced significant deterioration in their stock prices."
In his retaliation case, Ben-Artzi is represented by Labaton Sucharow and the Government Accountability Project.
Deutsche Bank denied the whistleblowers' allegations, but said it will cooperate with the SEC's investigation. "The valuations and financial reporting were proper, and a significant portion of these positions were subsequently unwound in an orderly sale," Renee Calabro, a spokeswoman for Deutsche Bank in New York, said in a statement, according to the San Francisco Chronicle.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.