Legal Legacy

Cartel Deals at Last Job Haunt Deutsche Telekom Executive

Thomas Kremer Telekomvorstand. Source DPA
Thomas Kremer, board member at Deutsche Telekom, is being questioned about his role in a rail cartel.
  • Why it matters

    Why it matters

    An investigation into compliance failures at his former employer is causing trouble for Thomas Kremer, the chief compliance officer at Deutsche Telekom.

  • Facts

    Facts

    • Several former Thyssen-Krupp managers are blamíng Thomas Kremer for failing to oversee compliance at the steelmaker.
    • The outcome of the case could jeopardize Mr. Kremer’s chances of securing the position of head of human resources at Deutsche Telekom.
    • Thyssen-Krupp was accused of being in a cartel that set the price of steel for railroad tracks.
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    Audio

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Deutsche Telekom management board member Thomas Kremer, who has been in charge of data privacy, legal affairs and compliance at the telecommunications company for more than two years, won’t be able to shake off his past at one of the largest steel makers in Europe, Thyssen-Krupp.

In an antitrust investigation against the steelmaker, several defendants have announced their intention to expose what they view as glaring deficiencies in compliance in connection with the sale of steel for railroad tracks at a time when Mr. Kremer was chief compliance officer at Thyssen-Krupp.

Prosecutors are accusing 14 former managers at the steelmaker and other companies of fixing prices in the German railway steel market for years. According to internal records of the companies allegedly involved, the price fixing resulted in a cost of about €1 billion ($1.31 billion) to German taxpayers, who ultimately pay for most of the railway track laid in Germany.

 

001 Thyssen-Krupp
ThyssenKrupp by the numbers. Source: ThyssenKrupp

 

At least two of the defendants intend to prove that Thyssen-Krupp’s compliance department exercised poor control in the hope of weakening the prosecution’s charges against them.

This places Mr. Kremer at the center of the case, which will likely come before a regional court in Essen early next year. As the chief legal officer at Thyssen-Krupp between 2003 and June 2012, Mr. Kremer, a native of Bonn, was expected to ensure that the group’s business transactions complied with the law.

The rail cartel, which was only exposed in the spring of 2011, wasn’t the only criminal intrigue for which Thyssen-Krupp was used as a cover. Employees also formed cartels in other areas and paid bribes to kick-start contracts.

According to internal records, the price fixing resulted in a cost of about €1 billion ($1.31 billion) to German taxpayers.

Thyssen-Krupp has already paid fines in the triple-digit millions for these transgressions. The fines have contributed to the company’s troubled financial situation.

Observers believe that effective control could have prevented the abuses or at least led to an earlier discovery. The company’s internal compliance department, at any rate, was more or less clueless about illegal activities within its own ranks before prosecutors became involved. A government investigator has quietly referred to Mr. Kremer as a “blunt sword of compliance.”

The series of problems at Thyssen-Krupp did not interfere with his career. In June 2012, Mr. Kremer was appointed to the management board at Deutsche Telekom, which has put him in charge of compliance. Because of the amount of data the Bonn-based company collects each month, the position probably makes him Germany’s most important compliance officer. In 2013, Mr. Kremer was also named acting head of human resources. He liked the job and has since positioned himself as a permanent successor to Marion Schick, who stepped down in April for health reasons.

Nevertheless, Mr. Kremer will not be able to escape his past at Thyssen-Krupp. The public prosecutor’s office has named him as one of the witnesses it will call to testify in the rail cartel trial. According to some of the defendants, he will have to answer a few questions about his work for the Essen-based steelmaker. They intend to demonstrate that he wasn’t doing his job properly.

“At this point, I wish to reemphasize that I did everything in my power during my tenure at Thyssen-Krupp to prevent compliance violations and consistently clear up suspicious cases.”

Thomas Kremer, Chief Compliance Officer, Deutsche Telekom

The defendants believe that a ruling by the Essen Labor Court on April 8, 2014, reinforces their strategy. Thyssen-Krupp had sought legal redress from one of its former employees allegedly involved in the price-fixing arrangement – and failed miserably.

Explaining her decision, the judge cited the compliance system at Thyssen-Krupp, which she had given a failing grade. She argued that because the group had ignored concrete information about the cartel during internal investigations in 2004 and 2006, the former employee could not be blamed for the price collusion.

The judge also explained whom she believed could have taken action. “In this case, compliance was handled by Thyssen-Krupp AG as the group parent company.” According to her ruling, the responsibility lay with Mr. Kremer.

Mr. Kremer has denied all accusations. “At this point, I wish to reemphasize that I did everything in my power during my tenure at Thyssen-Krupp to prevent compliance violations and consistently clear up suspicious cases,” he said.

The executive is likely to take the same position in the criminal proceedings in which he has been summoned to testify. Nevertheless, questioning by the defense will also be of interest to the investigators. According to the minutes of a hearing by the public prosecutor’s office on March 14, Mr. Kremer revealed a lapse of memory. In the roughly three-hour meeting with the officials, he also pointed out that he was only appointed chief compliance officer at Thyssen-Krupp in April 2007.

It was a surprising claim, because when he spoke with the members of the supervisory board at Deutsche Telekom during the application process, he told them that he had been responsible for compliance since 2003. This contradiction isn’t the only inconsistency that will be addressed in the trial.

 

This article was translated by Christopher Sultan. To contact the authors: martin.murphy@vhb.de and martin.wocher@hvb.de

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