Corruption Conviction

The Doctor is In - Jail

Schulte and his lawyers DPA
Presiding judge Peter Rühle was convinced that Mr. Schulte, center, had embezzled €147 million from mutual funds.
  • Why it matters

    Why it matters

    Heinrich Maria Schulte was found guilty of embezzling €147 million from closed-end investment funds and sentenced to eight and a half years in prison.

  • Facts


    • German savers have invested a total of €100 billion in closed-end funds.
    • Bankhaus Wölbern accumulated more than €3 billion in assets in its closed-end real estate funds since the 1970s.
    • Mr. Schulte used the worthless “bonds” of a Dutch offshore company, Wölbern Invest B.V., to siphon off money from the investment funds.
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Hamburg Regional Court, Room 337, Monday morning, 9:32 a.m. Heinrich Maria Schulte walked into the room. He was slightly late to the 50th day of his trial but, as always, impeccably dressed.

Mr. Schulte, former manager of Wölbern Invest, blew a kiss to the assembled journalists and waved to his family behind the court’s glass wall.

He rubbed his hands, tugged at his suit, the only signs of nervousness he showed through the trial. Even when his sentence was read out – eight and a half years in jail – Mr. Schulte barely showed any emotion.

He was convicted of embezzling €147 million, or $157 million, from mutual funds. He has since returned €31 million.

The verdict marked the preliminary end of one of the biggest investor scandals in the arena of closed-end funds.

Investors noticed early on that something was wrong but it took them two years to stop bleeding cash.

“If the authorities had reacted earlier, we investors would still have millions more today.”

ferdinando caballero, investor

The investors had invested in closed-end real estate funds offered by initiator Wölbern Invest. These fragmented shares of buildings, ships or wind farms are more popular in Germany than in any other country, with German savers investing a total of €100 billion in closed-end funds.

They are weakly regulated products in a gray capital market.

One investor recalled what drew him to the funds. “A building is something you can actually touch,” said Ferdinando Caballero, owner of a small business. He invested a six-figure sum in Wölbern funds several years ago. One was a building rented to a university in Vienna. “At the time, Wölbern funds were seen as nothing too fancy – but sound. That was more my kind of investment, I preferred that to putting my money into tech stocks.”

Mr. Cabellero has since become managing director of the university building that was taken over by investors – but not before his predecessor, Mr. Schulte, had siphoned off €4.1 million.

More than 30,000 Wölbern investors believed their investments were sound. Bankhaus Wölbern had offered closed-end real estate funds since the 1970s, and the bank had collected more than €3 billion over the decades. It had an excellent reputation, and the funds were generating respectable returns.

But then Mr. Schulte arrived.

He took over Bankhaus Wölbern, together with its fund division, in 2006, shortly before the financial crisis.

He was a professor of medicine and had been physician-in-chief at several highly specialized clinics, and he owned villas on the Elbchaussee in Hamburg and the resort island of Sylt, as well as a yacht and a painting collection. He was a man with an aura and expensive lifestyle, but he knew little about the banking business, and even less about closed-end funds.

Things went downhill from there.

The bank suffered during the financial crisis and had to be bailed out. After the bailout, Mr. Schulte was only left with the Wölbern Invest fund company, which had been spun off.

The company was suffering from a lack of new business, and by 2009, Wölbern Invest was apparently barely able to pay its employees and its bills. But the funds, owned by the investors and not Mr. Schulte, continued to generate millions in monthly rent revenues.

It was a great temptation.

The court found that Mr. Schulte withdrew money from the funds 327 times since mid-2011. The withdrawals ranged from €20,000 to several million.


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The court sentenced Mr. Schulte to seven months in prison for defrauding the company of €20,000, while an incident involving €4 million could cost him five years in prison. For all the crimes combined, he received an eight-and-a-half-year sentence. The determining factor was that Mr. Schulte knew what he was doing, Judge Peter Rühle said. “The defendant disposed of the fund assets as if they belonged to him.”

It began in August 2011, when the financial crisis was also affecting Mr. Schulte’s personal finances. His villa on the Elbchaussee was about to be foreclosed. That’s when he came up with the idea of “liquidity management,” in which funds could lend each other money and charge interest. Money was withdrawn from many funds but little of it ended up in other funds.

Some €60 million disappeared during a “test phase” lasting until the end of 2011, according to the prosecution’s investigation. In 2012, the investors obtained a court order to put an end to “liquidity management.”

What they didn’t know is that from then on, further millions were withdrawn from the funds through the worthless “bonds” of a Dutch offshore company, Wölbern Invest B.V., of which Mr. Schulte was also chairman.

He issued the worthless bonds, subscribed to them as managing director of the fund and, as head of the trust company responsible for investors, rubber-stamped everything. “The whole thing is a joke,” Mr. Caballero, the investor, said. “He was wearing one hat as managing director and another as trustee. In the end, he was supposed to be asking himself critical questions.” This is a systemic problem, Mr. Caballero said. “In many funds, you still see this kind of setup today.”

Industry expert Tilman Welther, editor-in-chief of the newspaper Fondszeitung, also sees weaknesses in the system. “I see these events as isolated incidents. But the type of company typically used with closed-end funds until now, makes supervision more difficult.”

It took two years, to September 2013, to arrest Mr. Schulte and stop the money hemorrhaging.

The investors spent several months fighting to gain access to account data, including the addresses of their fellow shareholders. There were hurdles along the way; the public prosecutor’s office suspended its investigation for a period of time, then the financial regulator Bafin disputed whether the case fell within its jurisdiction.

“If the authorities had reacted earlier, we investors would have millions more today,” said Mr. Caballero.

And Mr. Schulte? Prosecutors had recommended 12 years in prison. One of his attorneys, Wolf Römmig, told Handelsblatt that Mr. Schulte remains strong, even after 19 months in pretrial detention. “He’s an incredibly disciplined client,” said Mr. Römmig, noting that Mr. Schulte gets up at 7 every morning, corrects the doctoral theses of former students and remains in very close contact with his family. “Most of my clients who were in pretrial detention were broken when they came out. I don’t have that impression with Mr. Schulte.”

Mr. Schulte remains in prison and his sentence has not yet been finalized. His defense lawyers plan to lodge an appeal with the Federal Supreme Court, and will move for an acquittal.

The prosecution is also considering an appeal, believing the verdict is too lenient.


Handelsblatt’s Andreas Dörnfelder reports on companies; Gertrud Hussla writes about finance and pensions. To contact the authors:,

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