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Deutsche Telekom Says Obermann Is Suspect in Corruption Probe

Rene Obermann, CEO of Deutsche Telekom
Rene Obermann, chief executive officer of Deutsche Telekom AG. Photographer: Jacob Kepler/Bloomberg

Deutsche Telekom AG, Europe’s biggest phone company, said Chief Executive Officer Rene Obermann is a suspect in a corruption probe led by Bonn prosecutors.

Obermann, 47, is one of eight suspects in the investigation that centers on alleged bribery payments at central and eastern European units, Mark Nierwetberg, a Deutsche Telekom spokesman, said in an e-mailed statement yesterday. The allegations against Obermann are false, Nierwetberg said.

The case, which is also being investigated by U.S. securities regulators, concerns Deutsche Telekom units in Hungary and Macedonia. The prosecutors are investigating whether Obermann in 2005 said he would only approve dividend payments at the Makedonski Telekom unit if Macedonia didn’t open the telecommunication market to competition.

“Prosecutors link this to alleged bribery payments made by third persons,” Nierwetberg said. “The chief executive rejects the allegations of criminal wrongdoing made against him as false.”

Bonn prosecutors opened their own bribery probe after they were asked by the U.S. Securities and Exchange Commission for assistance. The German magazine Wirtschaftswoche said yesterday that Obermann’s home was searched Aug. 31.

SEC Probe

Obermann testified as a witness in the U.S. investigation at the end of 2009 and has never been a suspect in the U.S. probe, Nierwetberg said. Deutsche Telekom has always fully cooperated with U.S. authorities, he said.

Some of the suspects aren’t company employees, Nierwetberg said. Prosecutors raided private homes of people at Bonn-based Deutsche Telekom as well as offices of other companies in late August as part of the probe.

Deutsche Telekom said in a Feb. 25 SEC filing that an independent investigation initiated by the Hungarian unit, Magyar Telekom’s, audit committee revealed sham contracts, worth about 31 million euros ($40.4 million), may have been used by Montenegrin and Macedonian units in 2005.

Some payments were authorized by former Magyar Telekom executives and Deutsche Telekom employees previously assigned to the units. They were made “through over 20 suspect consultancy, lobbying, and other contracts.” No legitimate purpose for the contracts could be established, the company said in the filing.

Macedonian Charges

Macedonian authorities filed charges against four individuals in 2008, including one Deutsche Telekom employee, the company said in the filing. Hungarian authorities are also investigating.

Since taking over Deutsche Telekom in 2006 Obermann has tried to revive the company’s U.S. and U.K. units, both of which have lagged behind market leaders. In March, the company won European Union approval to combine its U.K. operations with France Telecom SA’s Orange U.K., creating the largest British mobile operator. The companies estimated the deal would save more than 4 billion euros.

In the U.S., Deutsche Telekom’s T-Mobile USA began rolling out a third-generation mobile network that dwarfed those of larger rivals AT&T Inc. and Verizon Wireless in some regions. Still, the German company’s U.S. unit, which accounts for a quarter of revenue, lost 93,000 customers in the second quarter of this year and posted an 11 percent decline in operating income.

Deutsche Telekom Shares

Deutsche Telekom shares have climbed 1.75 percent this year, even as second quarter net income fell due to costs associated with the U.K. merger. They fell 3 cents to 10.47 euros in Frankfurt yesterday.

Obermann joined Deutsche Telekom in 1998 and became a board member in 2002. His telecom career began when he co-founded ABC Telekom, a retailer of answering and fax machines, as a 23-year-old student at the University of Muenster.

Deutsche Telekom was also investigated from 2008 through 2010 over allegations that its managers attained phone records of journalists and supervisory board members to search for the sources of news leaks. A former security manager is currently on trial in Bonn in that case.

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