Email Furor Leaves Deutsche Bank’s Reputation at Risk Once More

(Bloomberg) -- Shortly after a controversial set of emails between a Deutsche Bank AG supervisory board member and Wirecard AG’s then-Chief Executive Officer Markus Braun became public last week, Paul Achleitner picked up the phone for a tense conversation.

The Deutsche Bank chairman spoke to his colleague, Alexander Schuetz, letting him know he found the content of the exchange unacceptable, according to people familiar with the discussion. Achleitner is due to speak to Schuetz again this week. While the director publicly apologised for his comments, he doesn’t plan to resign for the time being, one of the people said.

In his conversations with Braun, Schuetz had called for the Wirecard CEO to “finish” the Financial Times because the newspaper had published a critical article about the payments company’s accounts. After the exchange became public, Deutsche Bank took the unusual step of publicly rebuking Schuetz, calling the emails unacceptable in tone and content.

The growing furor over the director’s conduct risks hurting Deutsche Bank’s public standing, putting pressure on Achleitner to contain the fallout. Investors and lawmakers have come out faulting Schuetz’s actions and questioning Deutsche Bank’s code of conduct, at a time when Germany’s biggest bank works to repair its image damaged by past scandals.

”We see a very high reputational risk for Deutsche Bank, especially because there’s a very public debate around Wirecard,” said Ingo Speich, a fund manager at Deka, one of the 20 biggest shareholders in the lender. “The ball is in the supervisory board’s court.”

A spokesman for Deutsche Bank declined to comment, as did Schuetz.

Hard to Fire

For Achleitner, there’s no straightforward path out of the scandal. While a supervisory board has the power to appoint and dismiss senior executives, its own members are voted in by shareholders at the general meeting.

That raises the hurdle to remove members, whose role is to act as controlling council for the executive board. Schuetz joined the board in 2017 and his mandate is due to run until 2023. He also sits on the bank’s nomination committee, making him a powerful actor in choosing new board members -- including the chairman.

Schuetz owns 17.4 million shares in the bank, making him one of the 15 biggest investors.

The controversy surrounding Schuetz erupted last week when lawmakers probing the collapse of Wirecard disclosed a series of emails between Schuetz and Braun dating back to late February and early March of 2019.

Yacht Life

The two men initially exchanged pleasantries about their summer vacation plans aboard yachts on the French coast. Schuetz suggested the families meet at some point, though Braun later said he couldn’t make the proposed date because of other business commitments, according to the exchange seen by Bloomberg News.

The correspondence took a turn after Schuetz mentioned the revelations in a recent article in the Financial Times, jokingly calling Braun a “bad boy” before proceeding to demand Braun “finish” the newspaper.

Lawmakers probing the collapse of Wirecard recoiled, saying the correspondence “sheds a bad light on Germany’s largest bank,” according to Jens Zimmermann, the lead Social Democratic lawmaker in the parliamentary investigation committee.

“Its a serious setback for Deutsche Banks attempts to enhance public trust and reputation”, said Zimmermann, who was first to bring up emails last week while questioning Deutsche Bank CEO Christian Sewing. Sewing said at the time he hadn’t been aware of the exchange.

Personal relationships between executives from different companies are common, particularly in the German corporate landscape where half of the supervisory boards are typically made up of executives from other companies.

Compliance Debate

At the time of the exchange between the two men, Wirecard was still viewed as a promising enterprise, though the first revelations by the Financial Times had begun chipping away at its image as a high-flying centerpiece of the mobile payments revolution.

In an interview last week, Schuetz said he believed at the time of his correspondence with Braun that the accusations leveled against Wirecard were unfounded. In fact, they proved prescient as Wirecard’s dealings with third-party providers in far-flung places like Asia and the Middle East turned out to be marred by fraud and fictitious transactions.

Braun was detained shortly after Wirecard went under last year and has been in jail since. He appeared briefly a few weeks ago in front of the parliamentary hearing, where he largely refrained from answering questions.

“Deutsche Bank should review its compliance policy in light of what has become known about the relationship” between the two men, said lawmaker lawmakers Fabio de Masi, who is also part of the parliamentary investigation probing the Wirecard collapse.