German lawyers poised for fall-out from property fund bribery scandal
8 November 2004
21 June 2013
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24 October 2013
German lawyers are gearing up to deal with turmoil in the property fund market as the local regulator and the Frankfurt Public Prosecutor’s Office have begun ramping up their investigations into allegations of bribery within the industry.
German prosecutors are looking into claims that property developers, architects, surveyors and construction companies systematically used bribes to persuade property fund managers to acquire their buildings during a range of deals that took place between 1999 and 2003.
The German financial regulator BaFin is also conducting a separate inquiry into the allegations in a bid to establish whether shareholders in the funds have suffered as a result of any alleged bribery.
Frankfurt public prosecutor Wolfgang Schaupen-steiner, who is leading the investigation, has said he is now interested in speaking to as many as 50 individuals involved in the property industry. The investigation could also lead all the way to London, although Schaupensteiner has yet to decide whether it is necessary to contact his UK counterparts.
Two of Germany’s oldest and largest property funds have already been directly implicated in the scandal. They are Deka-Immobilien-Fonds, run by DekaBank, and Grundbesitz-Invest, managed by DB Real Estate, a subsidiary of Deutsche Bank.
Several of Germany’s largest law firms are understood to have been instructed already regarding the investigations. However, few are talking openly about this, as the property fund companies look to distance themselves from the scandal.
In a statement to The Lawyer, DB Real Estate said: "According to our investigations so far, there is no reason to suspect damage to either our open-end or closed-end funds." However, it has also clarified that the company "will do everything possible, in consultation with the authorities, to ensure that the allegations are fully cleared up".
Meanwhile, a spokesperson for DekaBank told The Lawyer: "In individual cases, DekaBank is cooperating with several reputable legal advisers and auditors."
Clifford Chance is thought to be the most likely candidate to be advising DB Real Estate, while DekaBank is likely to take advice from Haarmann Hemmelrath, Linklaters or Simmons & Simmons – all of which have worked for the company in Germany the past. Latham & Watkins is also likely to be advising longstanding client Difa, another of Germany’s largest property funds, although the fund has not been directly implicated in the investigations.
If the investigation does spread across from the Continent, several UK firms with existing relationships with German property funds may also be instructed in relation to the investigation. For example, both Linklaters and Nabarro Nathanson have advised DB Real Estate on its UK property portfolio in the past. Linklaters has also advised Difa since it entered the UK market.
Meanwhile, Simmons, which has advised DekaBank on the acquisition of most of its UK property portfolio, and which is currently assisting with its disposal of the St Enoch Centre in Glasgow, is the obvious candidate to advise DekaBank in the U