Deutsche Bank’s Fitschen Risks Ackermann-Style Court Commute

Jul 30, 2014 7:31 am ET

(Updates with ex-Porsche CEO in 6th paragraph from end.)

July 30 (Bloomberg) -- Deutsche Bank AG Co-Chief Executive Officer Juergen Fitschen is seeking to keep prosecutors from filing charges against him. If he fails, he may have to juggle his duties with his defense as his predecessor did a decade ago.

Munich prosecutors are weighing whether to charge the 65- year-old Fitschen with attempted fraud in a legal battle with the heirs of the late Leo Kirch, the man who dominated Germany’s media market for four decades until his group went bankrupt in 2002.

The case highlights the increased oversight banks face and any charges threaten to distract Fitschen as Deutsche Bank seeks to resolve regulatory probes into benchmark interest and currency rates. Deutsche Bank said yesterday that pretax profit rose 16 percent in the second quarter from a year earlier. The company increased its litigation reserves by 450 million euros ($603 million) to 2.2 billion euros in the quarter, its filings show.

Josef Ackermann, Deutsche Bank CEO from 2002 to 2012, continued to work while he faced charges a decade ago that he approved what prosecutors thought were 57 million euros in over- generous bonuses as a supervisory board member of another company.

“These are different times than during the Ackermann trial -- the winds have markedly changed since” the financial crisis, said Thomas Koch, a lawyer at Luther Rechtsanwaelte in Cologne, Germany. “Politics and the public have partly established the image of banks as enemies. Public calls for sanctions against lenders are raised much quicker today.”

Kirch Lawsuits

The Munich probe is looking into allegations that former Deutsche Bank executives lied in court to fend off Kirch’s suits. The review started in 2011 and Ackermann and ex-CEO Rolf Breuer are among those being investigated. Kirch died in 2011 at the age of 84.

In 2013, prosecutors added Fitschen to the probe to look at whether he should have prevented the bank from using the testimony of the other officials in its court filings.

Prosecutors said in June they may issue a decision within the next few weeks. Thomas Steinkraus-Koch, a spokesman for prosecutors, declined to give a specific date. His office will decide whether to file charges against Fitschen, Ackermann, Breuer and other current and former board members before reviewing other suspects, he said.

Deutsche Bank and the men have denied any wrongdoing. Fitschen’s attorney Hanns Feigen and Deutsche Bank spokesman Armin Niedermeier declined to comment. Ackermann’s attorney Hellen Schilling declined to comment. Breuer’s lawyer Sven Thomas didn’t reply to an e-mail seeking comment.

Industry Interests

Fitschen, who along with Anshu Jain succeeded Ackermann in 2012, plays a key role in maintaining Deutsche Bank’s ties to German companies while lobbying for the industry’s interests as president of the BdB Association of German banks.

Criminal allegations generally trigger the attention of German financial regulator Bafin, said Luther Rechtsanwaelte’s Koch.

“The worst thing that can happen, at least in theory, would be Bafin ordering Fitschen to step down,” said Koch. “But that’s not mandatory, Bafin has wide leeway.”

Charges wouldn’t prompt Bafin to take action, as the presumption of innocence applies, said Sabine Reimer, a spokeswoman for the Bonn-based regulator. Bafin would review the information from a criminal case independently, she said.

Bafin Prompt

The possible violation at issue in the previous Ackermann case and the current one involving Kirch wouldn’t be the same, which may prompt Bafin to treat the two cases differently.

Ackermann was tried for approving bonuses as a director at Mannesmann AG. The case was eventually settled in 2006 after appeals judges overturned Ackermann’s acquittal by a lower court.

Fitschen would face charges he failed to prevent an attempted 3.3 billon-euro fraud against a client of his own bank. That’s the amount Kirch and his heirs were seeking.

The battle started after then-CEO Breuer in a February 2002 Bloomberg TV interview questioned Kirch’s creditworthiness. Kirch said the comments paralyzed refinancing efforts.

Prosecutors started the current probe after Ackermann, who took over as CEO in May 2002, and Breuer denied -- as part of the civil suits brought by Kirch -- that the bank tried to get restructuring business from his struggling media group. While Fitschen also testified, prosecutors are mainly looking at whether he should have stopped the bank from making false claims in the case.

Non-Criminal

Fitschen rejected attempts to settle the case earlier this year, two people familiar with matter said. Munich prosecutors proposed dropping the case if Fitschen paid a 500,000-euro fine plus a non-criminal finding that he didn’t supervise the bank properly, according to the people.

“Fitschen was probably concerned that paying a fine would have made it look like he was admitting he hadn’t lived up to his responsibilities,” said Martin Hellmich, a Frankfurt School of Finance & Management professor. “That might’ve handed Bafin a reason to push him out.”

Passing on the offer may also show Fitschen’s advisers are confident prosecutors won’t file charges or that he’ll be acquitted, said Martin Buecher, a defense lawyer in Cologne. “Lawyers only run such a risk if they are very certain about their case,” he said.

Ex-Porsche CEO

Any indictment would be reviewed by a court, before it could proceed to trial -- which isn’t a given for prosecutors. Wendelin Wiedeking, former CEO of Porsche Automobil Holding SE, this year convinced a Stuttgart court to throw out criminal charges against him. Prosecutors have appealed that ruling.

If the charges are allowed to proceed to trial, the court will most likely schedule trial hearings for two days a week for a period of months.

Ten years ago, Ackermann’s stints in Dusseldorf meant frequent 230 kilometer (140 mile) trips from the bank’s Frankfurt headquarters. For Fitschen, the trip from Frankfurt to Munich, where his case would be tried, would be longer at about 400 kilometers.

Prosecutors have already made life difficult for Deutsche Bank. In February, the lender settled the dispute with Kirch’s heirs, paying about 925 million euros with the hope the deal would also end the criminal probe.

Instead, investigators extended it, adding Stephan Leithner, the management board member responsible for legal issues and compliance, in-house lawyers and outside attorneys as suspects. In March, the bank was searched for a third time and law firms that represented it in the Kirch case were raided.

“The whole probe is a declaration of war against Deutsche Bank,” said Buecher. “Munich prosecutors are known for their toughness. They aren’t known for being afraid.”