Investigators Look into Frameups and Iniquity at German Bank

Moral Bankruptcy at HSH Nordbank

HSH Nordbank’s legal advisor Wolfgang Gössmann (left) was allegedly involved in a smear campaign against bank manager Frank Roth as well as an effort to frame a bank employee in the US, Roland K. Gössmann has since been relieved of his duties. Here, he is speaking with lawyer Joachim Erbe, whose Potsdam lawfirm was allegedly also involved in the scandal.

Child pornography planted on a work computer, a house break-in and illegal wiretapping: The leadership of Germany’s HSH Nordbank stands accused of going to great lengths to rid itself of unwanted senior officials. Prosecutors in both New York and Germany have launched investigations.

The memo from top management, issued at 4:18 p.m. on Friday, Aug. 20, was sent to everyone in the company. Reading it today, one has to wonder what is more shocking about the 22 lines in that note addressed to the bank’s “dear employees,” the chutzpah that led HSH Nordbank to take its employees for fools, or the cynicism that prompted it to claim that it loves its employees.

The memo, after all, was coming from a bank that apparently had no scruples about lambasting its employees, both professionally and personally.

The internal memo was HSH management’s way of preparing employees for the story SPIEGEL would publish the following Monday: Before the bank fired Chief Operating Officer Frank Roth in April 2009 without notice or compensation (the same Frank Roth CEO Dirk Jens Nonnenmacher had long been trying to get rid of), Roth’s office was allegedly bugged and his apartment broken into. Moreover, the evidence that led to his immediate dismissal, namely that Roth had revealed bank secrets to the press, was presumably false. Indeed, it appears that he was framed.

According to the HSH internal memo, management had only learned of these charges 14 days earlier, but now it was looking into the allegations. And to ensure that everything would take its proper course “under these circumstances,” the bank’s legal advisor, Wolfgang Gössmann, had been “relieved of his duties.” The “circumstances” in question were that Gössmann, who reported to Nonnenmacher, had supposedly been involved in the smear campaign.

If a half-truth is defined as something that contains at least half of the truth, the memo was closer to a lie than the truth. According to information SPIEGEL has obtained, Gössmann was not relieved of his duties because of the Roth case, or at least it wasn’t the primary reason. In fact, the story is even darker. There is another case in which Gössmann is allegedly involved, which revolves around the suspicion that the bank was also trying to rid itself of another top executive. The methods used in that case were as vile as could be.

Planted Pornography

This follows from a report by the WilmerHale law firm, which the bank itself commissioned. The report states that a New York district attorney has launched a criminal investigation against members of an HSH team, including Gössmann. The group was involved in a raid on HSH’s branch in Manhattan, targeting Roland K., the director of HSH New York, who the bank wanted to get rid of.

The HSH team quickly found what it was looking for during the Sept. 17, 2009 search: child pornography images, which it turned over to the New York police. The photos would not only have deprived Roland K. of millions in severance pay, but could also have ruined him in every other respect. But the investigation quickly took another tack. According to the WilmerHale report, the US investigators concluded that Roland K. was possibly the victim of a conspiracy, and that his employer was behind it all. The WilmerHale attorneys also concluded that there were many signs that the alleged child pornography evidence was planted prior to the raid.

It is a disaster for the bank: The district attorney’s office in New York now lists both Gössmann and CEO Nonnenmacher as possible suspects. Germany’s bank regulator, BaFin, launched a special investigation of the matter on Monday of last week. The Hamburg public prosecutor’s office has received the roughly 100-page “Preliminary Investigation Report” prepared by the US law firm, and prosecutors in Kiel, where HSH has its second headquarters, have also shown an interest in the report.

The decision to dismiss Gössmann was apparently based on the first preliminary results from this report, a connection that Gössmann disputes. Still, nothing about the New York case was to be revealed to the public. There was also word of it in HSH’s memo to its dear employees, which solely addressed the Roth matter (which was already impossible to keep secret).

Fabricating Evidence?

Of course, the American scandal now casts the Roth firing in a new light — and has piqued the interest of investigators. It raises questions as to connections between the Roland K. case and the Roth case — and whether such a dirty intrigue to shed unwanted employees could have involved Nonnenmacher as well.

The public prosecutor’s office in Kiel dropped its case against Roth after concluding that there was insufficient evidence that Roth had in fact leaked secret bank information to the press. Now the investigators are revisiting the case, but from a different perspective: Did HSH fabricate the evidence against Roth?

One clue suggesting it did is that the same names appear in both cases. A lawyer from the law firm of Joachim Erbe in Potsdam outside Berlin provided assistance in the raid of HSH’s New York branch. Roth, as it happens, had already encountered Erbe, who was present and taking the minutes when the bank notified him that he was being fired. Erbe also works closely with a Munich security firm, Prevent AG, which is staffed with former senior police officials and has been awarded contracts worth millions by HSH.

Prevent AG also played a role in both cases. First, it was involved in the New York raid. Second, several witnesses say that one of Prevent AG’s subcontractors, a man named Arndt Umbach, had admitted that he had bugged Roth’s office and broken into his apartment. More than two weeks ago, when Umbach suddenly denied ever having said or done any such thing, it was Prevent AG that released his statement a short time later.

Moral Bankruptcy

This certainly gives one pause. At issue is a German bank that resulted from the merger of two state-owned banks. The German states of Hamburg and Schleswig-Holstein still own 85.5 percent of HSH Nordbank.

Everyone knew that HSH was in serious financial difficulties. The two states had to bail out the bank to the tune of €3 billion ($3.8 billion) and provide it with another €40 billion in loan guarantees, because its managers had made bad investment decisions. But while the government shareholders were filled with panic and barely managed to keep their bank from collapsing, none of them noticed that HSH was also threatened by a different sort of bankruptcy: moral bankruptcy. Or perhaps no one wanted to notice.

HSH was in such serious trouble that its supervisors chose to place their unconditional trust in CEO Nonnenmacher, believing that he had the professional competence and ability to rescue the bank. One man in particular, Supervisory Board Chairman Hilmar Kopper, tied his fate to that of Nonnenmacher. By insisting that if Nonnenmacher went, so would he, Kopper went from being a watchdog to a participant. The bank’s supervisory board accepted as a necessary evil the possibility that Nonnenmacher, the mathematics professor, analyst and numbers man, had a worrisome blind spot when it came to matters of morality. He insisted on his special payment of €2.9 million, with no regard for the crisis it triggered in the governments of Hamburg and Schleswig-Holstein and the deep resentment it generated among bank employees whose bonuses he had cancelled during the crisis.

Nonnenmacher, it would seem, pays little attention to such trivialities; he hardly allows anyone to come very close to him. He is uncomfortable around people and unwilling to open up; he finds photo ops excruciating, perhaps explaining why he looks so awkward in photos. He didn’t even tell members of his staff that he had become a father. He keeps his distance and, most of all, is suspicious of others. “It’s practically pathological,” says one bank executive.

Last spring, the German business publication Manager Magazin reported that he planned to replace everyone on the executive board. A board member who knows him says that he has little appreciation for compromise and has a hard time settling differences in a spirit of goodwill.

A Password Behind a Picture Frame

Still, the question as to whether HSH Nordbank used every means at its disposal, particularly the Munich security firm Prevent AG and its subcontractors, to rid itself of those executives Nonnenmacher wanted gone, remains open. HSH Nordbank and attorney Erbe declined to comment on the case last Friday, while officials at Prevent have only said that the questions were based on “incorrect assumptions” in several respects and that the complexity of the matter meant that it needed more time. Gössmann, the legal advisor who has been relieved of his duties, finally issued a statement claiming that he was not involved in any campaign to tie the New York branch manager to child pornography. And such accusations, he said, are “false and improper.” 

Clearly the bank and its key officials must be considered innocent until proven guilty. But if the operation did in fact take place, it would less surprising that the culprit was HSH Nordbank, with Nonnenmacher in charge, rather than another bank.

Roland K., a US citizen, had been the head of the New York branch since 2002. When two employees were let go in 2007 in an effort to cut costs, they claimed that K. had only decided to dismiss them and not another female employee because he had had an affair with her.

The bank had the case investigated twice by law firms, with both concluding that K. had not discriminated against the fired employees. Although some felt at the time that the investigations had whitewashed the alleged discrimination, a ruling by a US court in one of the two cases has since arrived at the same conclusion as the two law firms.

Painful Defeat

The situation changed for K. when, in May 2009, German media reported on the two former employees’ pending lawsuits in the United States, and on sexual escapades within the bank. K. had become a burden. A new investigation by the accounting firm PriceWaterhouseCoopers focused on expense accounts. The auditors had their suspicions about an inordinately expensive ski trip to Wyoming with customers, but in the end it seemed that nothing would come of it. But that would have been a painful defeat for Nonnenmacher.

According to the strictly confidential WilmerHale report, that was when the bank resorted to cruder methods. In May 2009, when it was becoming clear that PriceWaterhouseCoopers and an additional law firm could not come up with sufficient evidence to fire Roland K., HSH legal advisor Gössmann met with employees of Prevent AG. The meeting marked the beginning of “Project Liberty,” which allegedly cost the bank at least €900,000. As Gössmann apparently later told WilmerHale in blunt terms, the purpose of Project Liberty was to speed things up at Prevent so that the security firm would come up with results more quickly than PriceWaterhouseCoopers. To achieve this, Prevent had completely different options at its disposal, options that Gössmann claimed he preferred not to know about, so as not to lose his good faith.

Gössmann has told SPIEGEL that he never said any of this. He also claims that the investigation was not directed against Roland K., but that it was merely a “neutral and open-ended review of expense account procedures at the New York branch.”

According to the WilmerHale report, Nonnenmacher also met early on with then Prevent board member Thorsten Mehles to be briefed on Project Liberty. Later on, when he became dissatisfied with Prevent’s apparent inability to turn up any solid evidence against Roland K., he pressed the firm for results. The goal of Project Liberty was to enable the bank to get rid of K. It was Nonnenmacher’s project, a secret project that was to be kept from fellow executive board members, including Deputy Chairman Peter Rieck.

An Email Address and a Password

On Sept. 17, 2009, the plan was ready to be put into action. According to the WilmerHale report, Nonnenmacher had scheduled a videoconference with K. for 10 a.m. to make sure that he would be in the office. A 13-member HSH team arrived at the New York branch at the same time. The team, headed by Gössmann and personnel manager Stefan B., included a partner from the Erbe law firm, Prevent AG official Mehles and four of his employees, as well as computer specialists from an IT firm and security personnel.

WilmerHale describes what happened next as follows: Roland K. hadn’t arrived at the office yet, but the team began searching his office as planned. A Prevent AG employee immediately suggested taking a closer look at the picture frames in the office, noting that picture frames were often used to conceal things. And, lo and behold, when the Erbe attorney pushed open a frame containing a photo of K.’s daughter, she found a sticker with an email address on it that included the word “kid.” Next to it was a term that could have been a password: “000ROBI.”

For the IT specialists, who were working on K.’s computer at the time, it was a piece of information that quickly yielded results. They had already found two suspicious-looking emails from a “Jan Nowak,” and one of the emails contained the email address pasted to the back of the photo of K.’s daughter. When they used the password on the sticker to access the email address, they immediately found an email from “Jan Nowak” that contained child pornography images.

According to WilmerHale, the team immediately turned everything over to the New York police, which launched a child pornography investigation. But on April 22, the investigators informed the bank’s attorneys that they believed that Roland K. was the victim of a conspiracy.

Trap Snapping Shut

It isn’t clear yet what prompted the New York police to arrive at such an assessment. There are rumors that a member of the team confided in the US investigators, but there is no mention of this in the WilmerHale report. Nevertheless, the New York district attorneys’ report concludes: “There is no compelling evidence that Mr. K. viewed the child pornography images from the email account on his office computer. However, there is compelling evidence that a trap was set for Mr. K., that the email accounted was created by someone else and that both the sticker on the back of the photo of Mr. K.’s daughter and the emails from Jan Nowack were planted.”

The goal, according to WilmerHale, was to “create the false impression” that K. was the owner of the email mailbox containing the child pornography images. But if it was a trap, it didn’t snap shut. For one thing, an unknown individual sent an email from the email address in question from an Internet café at a time when K. could prove that he was somewhere else. Instead, the trap is now snapping shut on those who presumably set it.

The bank had hardly learned that the New York district attorneys believed that Roland K. was the victim and not the culprit when the team members insisted that they were innocent. They claimed that they had no knowledge of any such smear campaign and were certainly not involved. Erbe had organized the group denial, although one member of the team preferred to remain silent.

In the end, the internal investigators were forced to conclude that there was no clear evidence to convict anyone. Nevertheless, they did notice something else that was unusual about the case. According to WilmerHale, Gössmann found out on April 22 that the New York district attorney’s office was investigating him. But he waited until April 28 to notify Martin van Gemmeren, the executive board member assigned to the case. In the meantime, presumably on April 23, Gössmann had his laptop repaired, which likely resulted in all of the files on the computer being deleted.

Searching for a Mole

Gössmann staunchly denies this account of events and insists that he only found out about the investigation in New York through van Gemmeren. “The insinuation” that he “deliberately deleted or had someone else delete data” is bizarre, says Gössmann. 

The WilmerHale report creates a credibility problem for the team, particularly Prevent AG investigator Mehles, who once worked as a department head in the Hamburg State Office of Criminal Investigation. While Mehles says that he was not involved in the decision to take the pornographic photos to the New York police, an employee wrote in an email that precisely the opposite was the case. And while Mehles claimed that he didn’t find out about the child pornography rumors surrounding Roland K. until August, Nonnenmacher and Gössmann said that Mehles was in fact the one who told them — in June or July.

This would support the assumption in the preliminary report that the team had already secretly agreed, long before the raid, on what exactly it was looking for: evidence of child pornography, not receipts for business expenses. Why else, WilmerHale argues, would the team have taken apart picture frames?

Besides, how would Mehles have heard about child pornography rumors tied to K. in faraway New York in the first place? Nonnenmacher says that Mehles told him that he found out from the FBI. In yet another contradiction, Mehles told WilmerHale that he had received the tip from journalists in Germany.

No Longer Viable

It is clear that the alleged attempt to get rid of Roland K. on the cheap has now turned into the most costly severance of an employee in company history. K. sued the bank for $2.49 million in severance pay and $10 million in damages. HSH has reportedly reached a settlement with K. for $7.5 million, a sum that represents something between a confession of guilt and hush money. The bank is also believed to have paid $1 million to K.’s attorney. An insider estimates that these costs, together with the costs of the internal investigation and the legal fees, bring the total cost to $18.5 million. “And that’s just because Nonnenmacher doesn’t know how to come to reasonable agreements with people,” say bank employees.

Even if Nonnenmacher’s role in the intrigue outlined by WilmerHale remains unclear, now that the attorneys have presented their report, he is no longer viable as the CEO of a bank in crisis. His bank’s survival depends on the confidence of its customers and, even more so, on that of the public sector. But HSH, true to form, is still trying to hang on to Nonnenmacher. Last week, the supervisory board announced that it believes Nonnenmacher is innocent, and that the report shows that he “acted in accordance with his duties at all times.” But anyone who hopes to find such a statement in the WilmerHale report is certain to come up empty-handed.

Gössmann was also spared. Despite being relieved of his duties, he says that he was still given an access card and company mobile phone. Perhaps this was to ensure that Nonnenmacher could still reach him after he had checked into a clinic.

It was only on a Friday, now almost three weeks ago, when there were already signs that the case could be made public, that the executive board issued an internal memo stating that Gössmann was on temporary leave because of the Roth matter. Now the damage-control plan was apparently to keep New York a secret while at the same time doing everything possible to dispel the accusations in the Roth case, particularly the charge that wiretapping specialist Arndt Umbach had spied on Roth for the bank, broken into his apartment and falsified evidence against him.

Bank Out of Control

The bank denies having applied pressure to Umbach. But it hardly seems coincidental that even before SPIEGEL published the story a week ago, Umbach went to a notary public on a Sunday to make the statement that he had never done anything illegal nor had he admitted to wiretapping. It was an about-face that had arrived at the right moment for the bank.

In fact, however, the circumstances in the Umbach case are such that his about-face does not necessarily take the pressure off the bank. There are too many indications that he is not telling the truth, that Roth was given a raw deal, and that he, like K., is apparently the victim of a bank out of control.

According to Gössmann’s testimony in the 2009 preliminary investigation against Roth, Nonnenmacher had complained in late 2008 that secret bank information was being leaked. Gössmann said that the two men had decided, in confidential conversations, to set a trap for the mole in the form of a management document. Each recipient would receive a copy with a slightly different mark on it. If the document were sent to the press and then returned to the bank, it would be clear who was responsible for the leak.

But who was to be the target of the trap? If Gössmann is to be believed (and this is certainly plausible, given Nonnenmacher’s character), the CEO speculated that the mole was trying to harm him and not the bank. The most likely culprit, he believed, was one of his fellow executive board members, chiefly Roth. This, Gössmann said during the hearing, quoting Nonnenmacher, was because “Mr. Roth knows that I want to get rid of him.”

Wim de Jong-Niehoff, a handwriting expert, prepared the documents. On an evening in February, at about 9 p.m., Gössmann and Nonnenmacher placed four slightly altered copies of the memo into envelopes for the remaining board members. Gössmann says that he handed the copies to Nonnenmacher, who then placed them in white envelopes and addressed them to the board members.

The document was apparently not leaked to the press, and more than three weeks later, says Gössmann, he attempted to set another trap, this time with a management document that was emailed to the board members.

Absurd in the Extreme

The plan worked the second time. Nonnenmacher received an anonymous letter from England containing both the first page of the hard copy document from February and a printout of the document that had been sent by email more recently. In a letter accompanying the documents, the individual, apparently a journalist, claimed that the documents had been sent to him so that he would publish them. But because they contained HSH company secrets, he added, he had decided to return them to the CEO.

Gössmann says that the markings on the documents clearly showed that they were the ones that had been sent to Roth. The name Arndt Umbach does not figure in Gössmann’s version.

Although the evidence against Roth may have seemed clear enough, it is in fact so absurd that the public prosecutor’s office in Kiel has long since withdrawn its case against Roth for revealing company secrets. The method Nonnenmacher and Gössmann chose to allegedly uncover an unknown mole seems more likely an attempt to target a specific individual: Roth. The prosecutors argue that it is quite possible that Roth was in fact the victim of planted evidence, partly because of the way in which the list of suspects was selected. A member of the supervisory board or a second-tier manager could just as easily have been responsible for the leaks, but none of these people received any marked documents — only the executive board members.

Did Nonnenmacher or Gössmann seriously expect their document to even reach the press? Or did they have a completely different plan in mind, namely to ensure that a copy of the version intended for Roth would be sent to an individual who they knew would send it back to Nonnenmacher?

The bank and Gössmann deny this, but there are strong indications to support this suspicion, a view that the prosecutors in Kiel also share. They too could hardly imagine that a real journalist would have returned the documents in question. Most of all, if the anonymous person had truly intended to take the honest approach and return the document to HSH, why didn’t he include all the pages? Instead, only the first page of the first document was returned to Nonnenmacher, and that page was the one that included the marked word, “Kernbank” (core bank). It was as if the sender had known that the first page was sufficient evidence.

Credibility Problem

Again, the various statements are fraught with contradictions. For example, Gössmann testified that Wim de Jong-Niehoff also prepared the second decoy, the management document that was sent via email. But in his statement to the police in Kiel, de Jong-Niehoff said: “I can rule out that we were involved in the incident.”

Who was it then?

The board members received the marked email from then Director of Corporate Communications Michaela Fischer-Zernin in early March. Gössmann had already filled her in on their plan to find the leak, and Nonnenmacher had also spoken with her. The document was emailed to her so that she could send it to the targeted board members. Then an unknown individual prepared it in less than an hour. Who could it have been, if it wasn’t de Jong-Niehoff?

About five months later, on July 29, Umbach attended a meeting at a Hamburg law firm with HSH supervisory board members Olaf Behm and Rieka Meetz-Schawaller, as well as the former head of HSH corporate security. If the minutes of the meeting are to be believed, Umbach admitted that he had prepared and sent the email on orders coming from the bank.

On the Friday of the week before last, Umbach was still sticking to his story. But he was also talking about the money he needed to disappear. He changed his story two days later and hasn’t been heard from since.

His new version has a serious credibility problem, because the people at the Hamburg meeting aren’t the only witnesses. Umbach and the former HSH security chief drove to Kiel to meet with prosecutors right after the meeting.

An hour later, three public prosecutors were sitting across the table from Umbach and his attorney. Umbach kept insisting that he be given immunity if he confessed. But there was no interrogation, partly because Kiel had transferred the case to the Hamburg public prosecutor’s office. But why would someone ask for immunity from prosecution if he hadn’t committed a crime? “Umbach’s retraction means nothing to us,” say the Hamburg investigators. Meanwhile, their counterparts in Kiel are weighing whether to bring charges against bank officials for falsely accusing Roth.

Poor Shape

This is an accusation that Hilmar Kopper, the supervisory board chairman, should also be pursuing. But Kopper, seemingly paralyzed by loyalty, is standing where he has always stood: behind Nonnenmacher. “The Supervisory Board has absolute confidence in the determination of the CEO to put a stop to such illegal machinations,” the supervisory board announced on Thursday after a meeting of the general committee, adding that it assumed that Gössmann, too, would be “fully rehabilitated” after all the investigations were complete.

Once again, this raises a number of puzzling questions. For instance, didn’t Kopper and the others read the WilmerHale report? Or do they hope that they’ll be the only ones who will ever be given access to it? And did they feel that the destruction of a person’s personal and professional life with trumped-up child pornography charges was nothing but collateral damage in a banking crisis?

A few days, Kopper stubbornly claimed that he still had no reason to doubt that Roth had leaked bank secrets to the press. He failed to mention that Nonnenmacher is listed as a suspect in the US investigation and that WilmerHale specifically concludes that there were parallels in the handling of both Roland K. and Frank Roth. He also said nothing about the fact that Nonnenmacher may have violated German stock corporation law when he set traps for his fellow board members without informing the supervisory board. Apparently the supervisory board feels that the best way to approach Nonnenmacher’s actions — the fact that he went over their heads and thus eliminated their supervisory role — is to forgive and forget.

But the bank has never been in as poor shape as it is today.


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