Deutsche Bank-Kirch Probe Charges Said to Be Sent to Accused

Aug 12, 2014 12:40 pm ET

(Updates with details on proceedings starting in 14th paragraph.)

Aug. 12 (Bloomberg) -- Munich prosecutors filed criminal charges in their probe into how executives at Deutsche Bank AG defended the bank in litigation over the collapse of Germany’s Kirch media group, said a person with knowledge of the case.

Co-Chief Executive Officer Juergen Fitschen was charged with attempted fraud, and prosecutors also indicted former CEOs Rolf Breuer and Josef Ackermann as well as former executives Clemens Boersig and Tessen von Heydebreck, Sueddeutsche Zeitung reported earlier today, citing unidentified people involved in the proceedings.

The charges, which concern the veracity of testimony in the civil case, were filed last week with the Munich Regional Court and the 600-page document is now being sent to the accused, the person told Bloomberg News by telephone, declining to identify the suspects. The person asked not to be named because the matter isn’t public. The court must now decide whether to allow the case to go to trial.

Deutsche Bank had sought to end the 12-year-old dispute when it settled with the heirs of the late media mogul Leo Kirch in February. The German bank agreed to pay 925 million euros ($1.24 billion) as Munich prosecutors pursued the criminal probe.

Instead of dropping the investigation after the settlement, prosecutors added in-house lawyers and outside attorneys to the list of suspects. The bank was searched a third time in March and offices of law firms that worked on the Kirch case were also raided.

Denies Wrongdoing

The prosecutors declined to comment until the suspects have been notified, their spokesman, Thomas Steinkraus-Koch, said in an e-mail when contacted by Bloomberg News today. He said last week that prosecutors had completed the first part of the investigation. Fitschen’s lawyer, Hanns Feigen, said he hasn’t received an indictment, declining to comment further. Fitschen has denied wrongdoing, as have his former colleagues.

“This isn’t ideal, but Deutsche Bank should be able to deal with the situation,” Dirk Becker, an analyst with Kepler Cheuvreux who recommends investors buy the stock, said by phone from Frankfurt today. “Should Fitschen be sentenced, he probably wouldn’t be tenable as CEO.”

Kirch Group filed for bankruptcy in 2002, claiming Breuer caused its demise when the banker questioned its creditworthiness in a 2002 Bloomberg TV interview. The media entrepreneur sought a total of 3.3 billion euros in lawsuits his heirs continued after his death in 2011.

Deutsche Bank spokesman Klaus Winker said the bank hasn’t yet received any indictment. The lender is convinced the suspicions against Fitschen will prove unfounded, he said.

Ackermann Testimony

Hellen Schilling, Ackermann’s lawyer, declined to comment, saying she doesn’t have “any official information.” Von Heydebreck’s lawyer, Klaus Volk, said he hasn’t yet been notified about the result of the probe.

Sven Thomas, Breuer’s attorney, didn’t immediately reply to e-mails seeking comment. Klaus Gussmann, who defends Boersig, didn’t immediately return a call seeking comment.

Ackermann in 2011 testified in a Munich court that the bank didn’t seek any business from Kirch before the group filed for bankruptcy. While the judges didn’t believe the former CEO and later ruled the bank was liable, prosecutors opened an investigation against him and other former executives on suspicion they lied in court to fend off Kirch’s claims.

Last year, they added Fitschen to the list of suspects. He was probed for failing to correct in a timely manner factual statements made by Deutsche Bank in court filings after he became aware that the statements were allegedly incorrect.

Judges’ Ruling

Fitschen 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. Co-CEO Anshu Jain, a former head of the Deutsche Bank’s investment banking and trading unit, is the company’s chief strategist and liaises with regulators outside the country and advises global investors.

“Jain will be able to jump in and meet important clients in Germany for Fitschen,” said Michael Seufert, an analyst at Norddeutsche Landesbank Girozentrale who recommends investors buy Deutsche Bank shares. “As long as it doesn’t escalate though, Fitschen’s reports will have been getting ready to fill in on a day-to-day basis.”

After the defense lawyers have reviewed the indictment and submitted their comments to the court, judges will rule on whether to start a 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. Like Fitschen, Wiedeking is defended by Frankfurt-based lawyer Feigen.

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

Settlement Attempts

“The company has been through similar scenarios in the past with Ackermann on trial and the fact that it has two CEOs means they can better cope with this,” said Kepler Cheuvreux’s Becker.

Ten years ago, Ackermann was tried in Dusseldorf 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.

The indictments will be reviewed by the panel of Munich judges who tried Formula One Chief Bernie Ecclestone, who settled his corruption case last week for the record sum of $100 million.

Fitschen rejected attempts to settle the case earlier this year, two people familiar with matter said July 30. 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.

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