Legal Advice

In Probe of Deutsche Bank Executive, Presumption of Innocence Must Prevail

Deutsche Bank
Yielding to pressure from shareholders, Deutsche Bank on Sunday said its co-chief executives, Jürgen Fitsche and Anshu Jain, both longtime bank veterans, would be stepping down amid a series of investigations and record fines.
  • Why it matters

    Why it matters

    Prosecution of the co-CEO of Germany’s biggest bank could deal another blow to the bank amid a spate of probes into its business practices.

  • Facts

    Facts

    • State prosecutors accuse Deutsche Bank officials including co-chief executive Jürgen Fitschen of attempted fraud.
    • At issue is how Mr. Fitschen advised lawyers defending the bank in a lawsuit by the Kirch Media group.
    • Deutsche Bank in February agreed to pay €925 million to the heirs of founder Leo Kirch to settle the suit.
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    Audio

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The prosecutors in Munich are getting serious. They have brought charges accusing a phalanx of Deutsche Bank executives of attempted fraud in connection with legal proceedings. Among those indicted are two former chief executive officers, Josef Ackermann and Rolf-E. Breuer, and a former board chairman, Clemens Börsig. The three have become estranged from one another, to put it politely, but the case is uniting them again. According to the accusations, the almighty of finance misled justice in a civil suit brought against the bank by late media mogul Leo Kirch, one-time owner of one of Germany’s biggest media companies, Kirch Media, and his heirs.

It is a highly embarrassing situation for Deutsche Bank, which has already been tarnished by a couple of scandals. It is detrimental of course to the reputation of a company when long-time representatives are seen as potential liars and tricksters. The situation looks especially threatening for another of the accused, Jürgen Fitschen, the co-chief executive. For him, it is not only a matter of reputation, but also of his fate as co-leader of the mighty institution.

Mr. Fitschen was put in office to symbolize the bank’s cultural change. He was meant to represent the cleansing of the excesses of investment banking, a focus on the model of an honest banker who nurtures the welfare of his customers. Now the bank president finds himself in the spotlight. He has already signaled that stepping down is out of the question. He says he wants to fight – for acquittal, for his honor, for his job.

Mr. Fitschen will fight any possible lawsuit to the end. In this, the embattled executive is right.

It is not at all certain that Judge Peter Noll – who is also handling the headline-grabbing case of Formula One President Bernie Ecclestone – will accept the charges offered by prosecutors. If Mr. Noll decides the evidence of the prosecution is not sufficient to establish a conspiracy of lies at the top of the bank, he cannot allow the case to go to trial. The deciding point will be that the presumption of innocence must also apply to bankers – particularly after the upheavals of the financial crisis.

In its aftermath, there were complaints that bankers escaped prosecution for their misdeeds. In Stuttgart, the former head of the troubled state bank Landesbank Baden-Württemberg had to answer for balance sheet manipulations. In Cologne, the former heads of Sal. Oppenheim, one of Germany’s oldest family-owned banking houses that was bought by Deutsche Bank in 2010, are standing trial to determine whether the managers were responsible for the near collapse of the bank in 2009. And in Hamburg, the former directors of HSH Nordbank, specializing in banking products for privately-owned medium-sized businesses, had to answer for their dubious dealings during the financial crisis. And the list goes on.

Lately, lawmakers and courts have been tightening the liability of executive and supervisory boards. That may be a sensible strategy but it also increases the chances for top managers to find themselves in the docks as defendants at some point in their careers.

In the aftermath of the financial crisis, there were complaints that bankers escaped prosecution for their misdeeds.

It is not a bad thing for the German economy’s hygiene when state prosecutors take their job seriously and rigorously pursue suspicious cases.

But in doing so they often shed light on gray areas. Particularly in breach of trust cases it is often difficult to provide evidence.

Have the accused managers really caused harm to their companies against their better judgment? Or were they simply incapable, which would also be tragic but not criminal. That is why the trial against Siegfried Jaschinski, the ex-head of Landesbank Baden-Württemberg, ended with the case being dropped. And the trial against the HSH Nordbank managers ended in an acquittal.

 

Jürgen Fitschen accuseed in Munich court. Source Reuters
Source: Reuters
The Deutsche Bank co-CEO Jürgen Fitschen. Source: Reuters

 

In Munich, the state prosecutors want to highlight a legal gray area with their accusations against Mr. Fitschen. A key point is the accusation that Mr. Fitschen did not prevent the bank’s lawyers from giving false testimony in court. Clarifying this accusation is like walking a tightrope. The fact is, according to corporation law, Mr. Fitschen as chief executive officer is responsible for every detail in the company, as are the other top managers.

But is this precept realistic? Shouldn’t a top manager be able to rely on his experts?

There is no reason for Mr. Fitschen to step down from his job, not based on the facts at hand. If we want public prosecutors to scrutinize our top managers, then we have to allow executives to legally fight their cases to the end without demanding their heads right at the start.

The author is deputy editor of the financial pages. He can be reached at: m.maisch@handelsblatt.com

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