Way Out

Plea Bargaining Bavarians Leave Justice in the Wake

kemmer-DPA-CHANGED
I got a good deal. How about you?
  • Why it matters

    Why it matters

    In Munich big name business people get charged with crimes, but plea bargain their way out of a court date by paying cash in exchange for a trial.

  • Facts

    Facts

    • Formula One racing boss Bernie Ecclestone paid €75 million ($100 million) to free himself of an accusation.
    • Michael Kemmer, the former head of BayernLB and now general manager of the Association of German Banks, probably will pay €20,000.
    • Such legal arrangements leave the public largely in the dark.
  • Audio

    Audio

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Justice has a fee schedule. The amount for settling a business lawsuit can vary between €20,000 ($26,389) and €75 million. These extremes were set within a couple of weeks by the Munich district court. It has developed into a sort of hub of the new dispensation of justice meted out according to euros and cents.

The geriatric but still powerful Formula One racing impresario Bernie Ecclestone paid €75 million to free himself of the indictment for bribery of an official – the same offense for which he is still sitting in jail, by the way.

This week, Michael Kemmer, the former head of BayernLB and now general manager of the Association of German Banks, will probably pay €20,000. Then, like three other colleagues, he must no longer defend himself against the accusation of having misappropriated assets because the sale of the Austrian Hypo Alpe Adria Group proved to be an economic mistake of the highest order.

Mr. Ecclestone and Mr. Kemmer are prominent figures in Germany’s business world. The trials and tribulations of a major state bank that wanted to be even bigger and, in a loss of reality, thought it could do anything have brought the Brit and the German together – as did the tendency of the public prosecutor’s office to stage a big trial and let it end in a deal that knows no verdict: only a cash amount to be paid into the state coffers.

This isn’t satisfactory. First, dirt is stirred up in such legal proceedings, then the accused have to endure critical press reports, and finally the astounded public doesn’t learn the facts of the case but rather just the euro amount to which all parties have agreed. 

What might have been justice disappeared in a big cloud of dust. What remains is a business deal: Money for peace and quiet.

What might have been justice disappeared in a big cloud of dust. What remains is a business deal: Money for peace and quiet. Mr. Ecclestone and Mr. Kemmer will go about their business as if nothing had happened in Bavaria.

The truth is that not just the representatives and business partners of a financial industrial-political complex were on trial.  The system itself was on trial. The guiding principle of this system was that not only the others – the agile private banks with their demanding stockholders – should be doing good business, but also the savings banks and their top institutes, the state banks, should have their fingers in everything where money is to be made: in real estate, loan securities, mortgages, and in investment banking.

The megalomania of public banks was once, 30 years ago, instigated by Friedel Neuber, the godfather of his West German state bank that came to power in the social democratic state of North Rhine-Westphalia. The brothers in spirit to the south, the social democrats of the Christian Social Union, didn’t want to be left behind.

Düsseldorf and Munich were the hubs of this state-controlled business movement that strived for something that today is being demanded again, recently even by the fallen CSU angel, Karl-Theodor von und zu Guttenberg – namely the political bank as counterpart to the supposedly scheming and shifty listed business banks that were responsible for the financial meltdown.

But what the BayernLB example in Munich shows is that Mr. Neuber’s financial capitalism is not one iota better but rather more dangerous. The financial institute in which the Bavarian state bank was heavily involved and which today it is completely in charge of, acquired a ramshackle firm, Hypo Alpe Adria, for €1.7 billion that had to be bailed out by the Austrian government 24 months later.

The bank executives in Munich had dreamed of major expansion into the Balkans, as intoxicated as they were, because they were sitting on Formula One shares from the insolvency estate of their client Leo Kirch, which made them interested in the big world of motorsports and susceptible to an indecent proposal from Mr. Ecclestone. It is typical that the board member responsible, Gerhard Gribkowsky, was apparently expecting a wonderful bonus for his work as he did from his ex-employer, Deutsche Bank.  

Ostensibly, in Munich, it was all about the wrongdoings of the managers. And what is the accounting for this?  Two board members reportedly are to pay only €5,000 each. Given such peanuts, an acquittal would have been more honest. However, those CSU politicians and ministers on the governing board who applauded and shouted encouragement never made it to the trial dock.  

How would it be to make the BayernLB into a bank without politicians and politics, with perfectly normal shareholders? That would at least be a lesson learned from the remarkable and strange court spectacle.

The author is editor-in-chief of Handelsblatt. He can be reached at: jakobs@handelsblatt.com

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