Deutsche Bank AG rejected a proposal to settle a 10-year dispute tied to comments by its former Chief Executive Officer Rolf Breuer about Leo Kirch’s media group.
The bank, Germany’s biggest lender, made the decision after a “thorough review,” it said in an e-mailed statement today. “Based on this review, which included the consideration of internal and external legal advice, the board decided without dissent not to accept the settlement proposal.”
Deutsche Bank and Kirch’s heirs discussed a possible 800 million-euro ($1 billion) settlement of claims Breuer’s comments caused the collapse of Kirch’s media group, a person with knowledge of the negotiations said last month. The Frankfurt-based bank last year was said to have rejected a 775 million-euro settlement proposed by a Munich court.
“It seems the people at Deutsche Bank who had to look at the proposal came to the conclusion the bank’s legal odds in court are better than what the settlement amount suggested,” said Michael Seufert, an analyst with Norddeutsche Landesbank Girozentrale in Hanover, Germany. “The pain threshold was reached with the 800 million euros and the bank’s leadership had to look at what’s in the interest of shareholders.”
Kirch, who died in July, pursued claims against Breuer and Deutsche Bank seeking at least 3.3 billion euros. The lawsuits, which continued after Kirch’s death, claim his media group failed because Breuer questioned its creditworthiness in a 2002 Bloomberg TV interview.
In the interview, Breuer said “everything that you can read and hear” is that “the financial sector isn’t prepared to provide further” loans or equity to Kirch. Within months, Kirch’s group filed the country’s biggest bankruptcy since World War II.
A spokesman for Kirch’s heirs, who declined to be identified, said they “are relaxed about Deutsche Bank’s decision and can only shake our heads about the leadership chaos at the bank.”
While winning a declaratory judgement by Germany’s highest civil court saying Breuer was wrong in questioning the company’s creditworthiness, Kirch’s side has so far failed to win any damage payments. To do that, it needs to show that the comments caused the bankruptcy.
Under German law, a corporation may face damage suits by its shareholders if it gives away money without justification. Deutsche Bank’s legal department and external lawyers had to analyze whether a settlement was in the best interests of the bank and what amount was justified based on an assessment of plaintiff’s chances of success in court.
Deutsche Bank rose 51 cents, or 1.5 percent, to 35.565 euros in Frankfurt trading at 4:41 p.m.
The settlement would have ended a plethora of lawsuits that Kirch instigated against the bank and Breuer. They included two damage suits currently pending at a Munich appeals court that yielded criminal probes against several bank executives over their testimony at trial.
Breuer last year agreed to pay 350,000 euros to settle a criminal attempted-fraud case over testimony he gave in 2003 in one of the suits. The litigation spawned a separate probe over statements Breuer gave last year in the second case.
Current Deutsche Bank CEO Josef Ackermann, Chairman Clemens Boersig and former board member Tessen von Heydebreck are also under investigation over their testimony. Deutsche Bank has denied wrongdoing by any of its executives.
The Munich appeals court today rejected a motion filed by Deutsche Bank in November seeking the removal of three judges in the case for bias, saying the bank’s bid was baseless.
The lender had claimed the judges secretly cooperated with prosecutors and were holding back parts of files Deutsche Bank lawyers wanted to inspect at the court. The bank didn’t provide evidence for its allegations and even “freely invented” some of the facts it argued took place, according to the ruling.
Deutsche Bank spokesman Christian Streckert declined to comment on today’s ruling.