Commerzbank says cooperating on probe of ex-IRS examiner WASHINGTON (Reuters) - Germany's Commerzbank (CBKG.DE) said on Friday it was cooperating with U.S. prosecutors in a case involving a bank employee charged with conflict-of-interest violations and exposing an Internal Revenue Service whistleblower. "The bank is fully cooperating with the authorities," a Commerzbank spokeswoman in Germany said by telephone on Friday, declining to answer further questions. Dennis Lerner, 59, was arrested on Thursday at his home in New Jersey, and taken before a judge in Manhattan. He was charged with violating federal conflict-of-interest laws and improperly disclosing confidential IRS information, according to legal documents released on Thursday by U.S. Attorney for the Southern District of New York Preet Bharara. Lerner, who was released on bail, could face up to 20 years in prison, Bharara's office said. The Commerzbank spokeswoman said on Friday that Lerner was still employed by the bank. A man reached by phone at Lerner's home declined to comment. Jonathan Marvinny, identified as Lerner's attorney in court documents, could not be reached for comment. The IRS declined to comment on the bank or the unnamed whistleblower involved. "We will not tolerate breaches of public trust by IRS employees," IRS spokesman Terry Lemons said. Lerner worked as an IRS examiner from June 2010 to August 2011. In that role, he audited an international bank for alleged underreporting of $1 billion in income, with help from a confidential whistleblower, said a statement from Bharara and legal documents based on a probe by the Treasury Inspector General for Tax Administration, an IRS watchdog unit. That bank, though unidentified in the legal documents, was Commerzbank, sources close to the case said. While he was working at the IRS, Lerner led negotiations between the agency and the bank on a $210 million proposed settlement, the documents filed by Bharara said. Then in September 2011, he abruptly left the IRS and took a job as North American tax director at the bank. Despite warnings from the IRS about talking with agency employees, Lerner subsequently phoned his former colleagues about the audit. He encouraged IRS employees to conclude the settlement negotiations, at one point walking in on talks between agency and bank employees, the documents said. Lerner also divulged to people not employed by the IRS the identity of the whistleblower and "details regarding pending IRS audits of other companies," the documents said. The Commerzbank spokeswoman declined to comment on the status of the bank's audit settlement with the IRS. No public announcement has been made either by the bank or the IRS of a settlement between them in the case discussed in the legal documents filed by Bharara. (Reporting by Patrick Temple-West. Additional reporting by Nanette Byrnes in Chapel Hill, N.C. and Alexander Huebner in Frankfurt.; Editing by Kevin Drawbaugh)