Favoring Fitchen

Deutsche Board Backs Indicted Co-CEO

Achleitner and Fitschen_DPA
For now, co-CEO Jürgen Fitschen (r) can still rely on the support of Deutsche Bank's supervisory board under Paul Achleitner.
  • Why it matters

    Why it matters

    Deutsche Bank could suffer serious reputational damage if charges of obstruction of justice against its co-CEO Jürgen Fitschen are proven in court.

  • Facts

    Facts

    • Deutsche Bank’s supervisory board is charged with monitoring the bank’s executives and has the power to hire and fire.
    • Jürgen Fitschen and four former Deutsche bank executives have been charged with obstruction of justice over the fall of the Kirch media empire.
    • The supervisory board is standing firmly behind Mr. Fitschen, sources said.
  • Audio

    Audio

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A parade of Deutsche Bank grandees appeared together in Berlin on Friday as the Frankfurt-based financial giant marked the 25th anniversary of the death of Alfred Herrhausen, the revered chairman of Germany’s largest bank, who was killed by a roadside bomb in 1989 while riding in an armored Mercedes-Benz.

The bank’s current co-chief executives, Jürgen Fitschen and Anshu Jain, as well as Rainer Neske, a member of the management board, attended an event to discuss Germany’s digital future. They were joined by Paul Achleitner, who leads Deutsche Bank’s supervisory board, a body that monitors the work of the bank’s executives and has the power to hire and fire them if needed.

“Mr. Herrhausen was a manager who looked far outside the box,” Mr. Achleitner told Handelsblatt. “He continually defied the zeitgeist and was not afraid to make unpopular decisions.”

Looking at the causes of the most recent global financial meltdown, Mr. Achleitner wondered aloud “if we would have gotten into a financial crisis if more bankers would have gone against the zeitgeist.”

Independent experts have concluded that the charge will not hold up.

Mr. Achleitner and his supervisory board will have more shadows from the past to deal with when they next meet in late October, ahead of the release of the bank’s third-quarter financial figures. Mr. Fitschen and his legal problems, which stem from a court case that began more than 10 years ago, will hover over the board’s meeting like a storm cloud.

Prosecutors in Munich last week charged Mr. Fitschen and four former Deutsche Bank executives, including former CEOs Rolf Breuer and Josef Ackermann, with obstruction of justice and making misleading statements. The charges relate to the lengthy legal battle between the bank and the estate of the late media mogul Leo Kirch, who accused the bank of purposely tipping his media empire into bankruptcy in 2002.

If the case goes to trial, it will be up to the supervisory board to decide whether Mr. Fitschen is still able to do his job. Industry sources believe the board will continue to support Mr. Fitschen, even if he is called to appear in court with the other defendants, but it will keep careful watch to ensure that the legal issues don’t affect his ability to perform his duties.

“There was nothing new in the content of the indictment, but the harsh wording in the prosecution’s statement is jarring,” an insider said.

In the future, it is likely that the supervisory board will continue to be guided by the legal advice of two experts, who were hired by Mr. Achleitner to give their independent opinions about the case against Mr. Fitschen. Both experts have concluded that the charge will not hold up, leaving Mr. Achleitner no reason to accuse Mr. Fitschen of dereliction of duty.

Industry sources believe the board will continue to support Mr. Fitschen, but it will ensure that the legal issues don’t affect his ability to perform his duties.

Eberhard Stilz, the former president of the higher regional court in Stuttgart, is one of the legal experts. He is said by sources to have noted in the report that the indictment could have an impact on Deutsche Bank’s reputation and could be “of particular significance” because the bank is introducing a cultural transition designed to strengthen confidence in its operations while burnishing its reputation.

It will fall to a so-called integrity committee within the supervisory board, chaired by another legal expert Georg Thoma, to conduct “preventive monitoring” of any risks to the bank’s reputation. But sources said the indictment alone is not grounds for action against Mr. Fitschen. Instead, one source said, the board will “determine for itself the seriousness of the accusations.”

The long-running case stems from a television interview Mr. Breuer gave in 2002, in which he suggested the Kirch empire could be on the verge of bankruptcy. Kirch promptly collapsed three months later, prompting Mr. Kirch to sue Deutsche Bank and Mr. Breuer, accusing the bank of seeking to profit from the insolvency.

Deutsche Bank and Mr. Breuer denied the charges but ended up settling the case with the heirs of Leo Kirch, who passed away in 2011, for €925 million ($1.24 billion) earlier this year.

Prosecutors have charged Mr. Fitschen and the former CEOs with an especially serious case of attempted fraud in the Kirch trial, claiming they worked “in collusion” to avoid paying compensation to Mr. Kirch’s estate. If convicted, they could face imprisonment of anywhere from six months to 10 years.

Mr. Fitschen has consistently argued that he had only “very, very few memories” of the relevant events.

Mr. Fitschen joined the management board of Deutsche Bank in 2001, but only took full control alongside Mr. Jain in 2012. Prosecutors have used unusually harsh words to describe Mr. Fitschen’s behavior when he was called to testify as a management board member in mid-2011. They say that he knew what information his colleagues had already presented in court, but did not contradict the testimony of Mr. Breuer and Mr. Ackermann.

“The accused Mr. Fitschen did not entirely follow the common defense strategy of the defendants in his testimony for the defense, but did not give evidence that was conclusive in itself,” prosecutors said in their indictment. “In this way, he wanted to avoid making verifiably false statements in the higher regional court of Munich. On the other hand, he did not want to torpedo the defense strategy of the accused with a clear account.”

A core element of Mr. Fitschen’s defense is likely to focus on the time that has passed since the decisive management board meeting at the beginning of 2002, where prosecutors allege the executives colluded to bring down Mr. Kirch. Mr. Fitschen has consistently argued that he had only “very, very few memories” of the relevant events.

This is consistent with the statement of a manager from the Deutsche Bank’s legal department, who said in a meeting in 2011 that Mr. Fitschen could not remember what had been discussed in the board meeting some 10 years earlier.

Since Mr. Fitschen withdrew from the management board at the meeting in 2002 – and worked for the next seven years in a newly formed executive committee that was separate from management – the defense will also argue that he no longer had any cause or opportunity to deal with the Kirch lawsuit, in contrast to the rest of the former board members that have been charged.

Any trial against Mr. Fitschen is unlikely to start before the spring of 2015. Mr. Fitschen’s contract runs until March 2017. That gives the bank plenty of time to prepare for any eventuality.

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Peter Köhler is a Handelsblatt financial correspondent in Frankfurt and heads the banking team. Frank Drost is a Berlin correspondent and covers politics and finance. To contact the authors: koehler@handelsblatt.com and drost@handelsblatt.com

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