Sand castle investments

Dreams in the Dust

Dubai Skyline_02_DPA
Glitz and glamor lured Robin Lohmann and his investors to Dubai.
  • Why it matters

    Why it matters

    Former Dubai fund manager Robin Lohmann and his father have been charged with embezzlement and investment fraud. In what was apparently a pyramid scheme, they collected millions from German investors to fund alleged construction projects in Dubai during the Gulf state’s real estate boom. Efforts to call the Lohmanns to account in Germany have proven difficult due to a lack of sufficient evidence.

  • Facts

    Facts

    • Through his firm Alternative Capital Invest (ACI), Robin Lohmann collected more than €150 million from more than 6,000 investors.
    • Charges were filed against Mr. Lohmann and his father, but the cases have dragged on in a German court, which has argued that prosecutors have insufficient evidence to secure a conviction.
    • The Lohmanns secured the rights to the names of sports legends like Boris Becker and Niki Lauda, to lend credibility to their real estate projects.
  • Audio

    Audio

  • Pdf

He used to spend his time in office towers, but now he is seeking protection in court. Mutual fund manager Robin Lohmann has barricaded himself behind a small human fortress in room 18 at the regional court in the northwestern German city of Bielefeld. His father, Hanns-Uwe Lohmann, is seated to his right, and his attorney to his left. Two more men sit in front of him. When Mr. Lohmann looks into the wood-paneled room, he sees the the face of the chief prosecutor. But Mr. Lohmann’s gaze seems empty on this day.

It is surprising that the defendant is there at all. Robin Lohmann, 39, has hardly spent any time in Germany in recent months. A band of police officers was even on his heels for a while. The hearing was supposed to be kept secret.

Six years ago, in 2008, Mr. Lohmann was still posing for photos with sports legends like German tennis star Boris Becker. He was even a little famous himself at the time, the German face of the real estate boom in Dubai. His business model in the Persian Gulf state was to buy up properties and participation rights to skyscrapers and quickly resell them at a profit. With his company, Alternative Capital Invest (ACI), Mr. Lohmann collected more than €150 million from more than 6,000 investors, promising them a 12-percent annual return.

It may have been a dubious promise, but Mr. Lohmann had also built a high-profile reputation by buying naming rights. His projects were called the Boris Becker Business Tower, Michael Schumacher Business Avenue, and the Niki Lauda Twin Towers, all named after famous German and Austrian athletes.

“Perhaps these people are still living in the lap of luxury. I want them to be held accountable.”

Dieter Schmalbeck, Investor

But the skyscrapers in Dubai remained nothing but visions. Boris Becker Tower turned into a three-story building, while Michael Schumacher Avenue and the Niki Lauda building never went beyond the foundations. The 12-percent return never materialized; most of the investors lost all of their money, and Mr. Lohmann was inundated with criminal complaints. The public prosecutor’s office investigated Robin Lohmann and his father and brought charges against them in two cases, one for embezzlement and one for investment fraud. The defendants denied the charges.

Investor Dieter Schmalbeck*, from the eastern German city of Magdeburg, also pressed charges. During the boom in Dubai, he had taken a look around and concluded: “Something is happening there.” He decided to invest a six-figure sum.

“The ACI funds had a great reputation at the time, even in the press,” Mr. Schmalbeck said. He explained that he had been under the impression that Boris Becker and Michael Schumacher had invested in the funds directly.

Mr. Schmalbeck never saw his money again. He has since lost all hope of recovering his investment, but he still wants to see justice served. “Perhaps these people are still living in the lap of luxury today. I want them to be held accountable,” he said.

He is unlikely to get his wish. The men who lost Mr. Schmalbeck’s money, as well as the savings of thousands of others, will be spared a severe penalty. The story of the ACI fund isn’t just about money being lost in the desert sands, it is a tale of how slowly the wheels of justice move in Germany.

 

Mutual fund manager Robin Lohmann of Alternative Capital Invest (ACI). Source: Raimund Vornbäumen

 

It’s been two years since prosecutors in Bielefeld indicted the father-and-son team from the nearby city of Gütersloh on embezzlement charges. The case has lasted so long that the chief investigator has since gone into retirement.

His successor faced the laborious task of sifting through the files. The indictment related to the last fund, ACI VII. The money investors had contributed to that fund was apparently siphoned directly into Robin Lohmann’s personal bank account, and the trustee failed to scrutinize where the money was going. The indictment also suggested that money from the ACI VII fund had been transferred to the previously established funds in the form of a distribution. In other words, a snowball system could very well have existed in the Arabian Desert.

The Bielefeld court finally reached a decision in August, when it dismissed the case. The judges argued that the bank statements that had been presented as evidence of the alleged transfers of funds were too incomplete. They also noted that there was no mention in the investment agreements of any monitoring of invested funds, so that ACI was in fact not required to perform such scrutiny.

 

Hanns-Uwe Lohmann, ACI Dubai Fonds, Alternative Capital Invest (ACI) Father heads the business in Germany,
Hanns-Uwe Lohmann, Alternative Capital Invest (ACI) chief, heads up the firm in Germany. Source: Raimund Vornbäumen/Neue-Westfälische

 

It is early September 2014. The other indictment, involving suspected investment fraud, is the subject of the hearing in room 18 of the regional court. The prosecutors had already filed the indictment in 2011, but this is one of those hearings that embodies the new approach to criminal justice in Germany, one in which decisions are increasingly negotiated behind closed doors.

The current hearing revolves around the question of what remains of the case, which has filled an investigative file consisting of four volumes, 600 pages and nine special binders. Should the case be dropped in return for payment of a fee? Or should it be tried in public proceedings, in which the defendants could face up to three years in prison or a fine? A look through the door reveals an unusual scene: judges and assessors not dressed in the customary robes, and a chief prosecutor making his case in jeans.

When the doors of the room open after two hours, Robin Lohmann and his defense attorney emerge and hurry down the corridor. Mr. Lohmann covers his face with his hand and looks down at the floor before disappearing behind a glass door. Through the glass, we see him chatting with his attorney, they even laugh for a moment. But Mr. Lohmann has no comment.

He was more talkative a few years ago. In his early 30s, Mr. Lohmann was one of the youngest in a group dubbed the “boom-time boys” in Dubai. After earning his broker’s license in New York, he studied business management in Hannover and had a brief career with a securities bank. He established the first ACI fund in 2004. His father, a former insurance salesman, managed the business in Germany, while his son handled the projects in Dubai. Before long, he had come to be known in the Gulf region as the “Master of Flip.”

There was tremendous demand in Dubai, with properties quadrupling in value before they were even built.

The market provided the perfect environment for his dealings. Whenever a developer unveiled a new project, investors immediately bought shares, which they promptly resold. There was tremendous demand in Dubai,  with properties quadrupling in value before they were even built. “We worked with 170 brokers in Dubai. They were constantly asking us: ‘Lohmann, what do you have in the pipeline?'” said his father.

Then came the global financial crisis, and real estate prices collapsed. Of the seven ACI funds in existence at the time, only one was paying dividends. The others were insolvent or had been deleted from the register. According to the senior Mr. Lohmann, most of the investors’ money went to four people who had sold properties in Dubai. He was unwilling to reveal their names. He also claimed that ACI received only a small down payment when it resold the properties, but he didn’t know how large that payment was, and said that the buyers absconded.

The public prosecutor’s office suspects a different course of events. It believes that ACI tried to charge hidden costs to the funds and, therefore, the investors. In the prospectus for the third fund, for example, there was no mention of commissions for real estate sales worth more than €5.6 million. Investors were not told about commissions, advertising and trademark expenses totaling almost €15 million. Depending on the fund, the real costs would have consumed up to 80 percent of investor capital. This, according to the public prosecutor’s office, is a key element behind the charge of investment fraud.

Dubai shattered dreams-correct

The senior Mr. Lohmann attributes these numbers to the rapid rise in real estate prices at the time. He claims that marketing and selling costs also rose in the process, and that these expenses had only been recognized in Germany.

But if this is the case, it is merely part of the truth. Another part can be found about an hour’s drive from Gütersloh, where there is a group of gray silos for plastic granulate. Inside the cramped factory building, machines are turning the plastic into windows. The company has annual sales of about €20 million.

The company has Mr. Lohmann to thank for its continued existence today. According to account statements, he transferred about €8 million to the company in 2008, saving it from bankruptcy. The memo entries read “Telegraphic TRF,” but they do not reveal that the son of the company founder and the person hired to clean up its finances were both friends of Mr. Lohmann. When questioned about the bailout outside the factory gates, the chief executive of the plastics company remained tight lipped. He did confirm, however, that Robin Lohmann still owns the company today.

The Lohmanns deny having embezzled money. But the strange transfers are not an isolated case. Mr. Lohmann remitted another €127 to a candle factory in the central German city of Fulda. It too was on the brink of bankruptcy at the time. The corporate reorganizer was the same person who had been hired to restructure the plastics company. Where did the money come from? According to the prosecutors’ investigation, it came from ACI funds in both cases. For investors, it would seem to be an absurd notion that of the money that was supposed to be working for them in Dubai, more than €20 million may have been injected into two ailing companies near the German cities of Wuppertal and Fulda.

Boris Becker beim Pokerturnier
Investors believed that celebrities like Boris Becker were involved in the projects, thanks to buildings being named after them. Source: DPA

 

Even though the investigators were convinced that they could prove the Lohmann father-and-son team guilty of embezzlement, the Bielefeld court felt that the evidence was insufficient. The judges argued that the account data was too inconsistent. According to a spokesman for the court, there was no probability of conviction, so that proceedings were not even initiated.

Similarly, the indictment on suspicion of investment fraud also seems to have come to nothing. The Bielefeld regional court recently decided to close the criminal proceedings, and Robin and Hanns-Uwe Lohmann were let off with a six-figure fine, but without a criminal record. In the grounds for its decision, the court argued that there was insufficient evidence to fully substantiate the charges.

ACI investors are deeply disappointed by the outcome. “These decisions are laughable,” said investor Schmalbeck. Because of ACI, he added, he has not only lost money, but also his faith in the constitutional state. What the investor doesn’t know is that the constitutional state treated Mr. Lohmann far more leniently than Mr. Schmalbeck suspects.

In June 2010, the government of Dubai issued a temporary arrest warrant against Robin Lohmann for suspected fraud. Through Interpol, the request was sent to the State Office of Criminal Investigation in Düsseldorf. German investigators began a nationwide search. They learned that Mr. Lohmann had a mobile phone contract with Mobilcom, that he had been seen in the company of a businessman in Mülheim an der Ruhr, and that he was a regular at a certain club in the old section of Düsseldorf.

The police planned to arrest Mr. Lohmann at the ACI office in Gütersloh in mid-September. It was only at the last moment that the officers realized that they could not arrest a German citizen on the basis of an arrest warrant from a non-European Union country. “The plan to arrest him was then cancelled before it was too late,” an internal document reads.

Robin Lohmann, the man responsible for thousands of investors losing their money, can sleep easy – the German state is taking good care of him.

*Name changed

Andreas Dörnfelder is a junior reporter in the investigative team of Handelsblatt. Gertrud Hussla has been with Handelsblatt since 1996. She worked as a correspondent in New York until 2003, since then she is based in the headquarters in Düsseldorf, where she recently moved onto the investigative team. Contact the authors:  doernfelder@handelsblatt.com and hussla@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!