Deutsche Bank suffers dual blow

Deutsche Bank is facing a leadership crisis at the start of 2006.

Its chief executive, Josef Ackermann, is under pressure to resign after Germany's federal appeals court ordered a retrial of a case involving 60 million euros of executive bonuses.

The money was approved by members of Mannesmann's supervisory board, including Mr Ackermann, when the mobile phone company was bought by Vodafone in 2000.

The position of the chairman of Deutsche Bank's supervisory committee, Rolf Breuer, is also under threat.

In a separate legal action, a court will decide later this month whether to order Deutsche Bank to pay damages to Leo Kirch over comments made by Mr Breuer about the creditworthiness of the media mogul's company, Kirch Media, parts of which subsequently collapsed.

Mr Ackermann has refused calls, including those from some of Germany's leading politicians, to stand down after the federal court's ruling on 21 December.

He and five other former Mannesmann directors, who were cleared of criminal action in 2004 over the bonuses, stand accused of neglecting their fiduciary duty to shareholders by approving the bonuses for the £110bn takeover.

As a non-executive director of Mannesmann, Mr Ackermann did not personally benefit from the bonuses he approved.

Mr Breuer has not shown great support for his chief executive so far and has admitted he has begun considering who might succeed Mr Ackermann.

"I strongly favour an internal candidate," he said after the ruling last month.

"Only if that is not possible will we go outside."The supervisory board, which has issued an expression of support for Mr Ackermann, will meet over the next month to approve the bank's annual results, which will be announced on 2 February.

The retrial will take place next winter.

Golden rule

Mr Breuer's own position is under threat because he broke the golden rule of bankers - to keep shtum about clients - in a television interview.

It is an error that may well haunt Deutsche Bank on 24 January when the federal court rules on a bitterly fought legal struggle between the bank and Mr Kirch.

A federal court judge, Gerd Nobbe, ruled last month that Mr Breuer should not have made these comments about Kirch Media's financial position.

What Mr Breuer - then the chief executive of Deutsche Bank - told Bloomberg Television in April 2002 might seem bland.

Talking about Kirch Media's creditworthiness, he claimed: "All that one can read and hear about the matter is that the financial sector is not prepared to offer further debt or equity on unchanged terms."

But two months after Mr Breuer's comments, Kirch Media's empire started to slide, as subsidiaries went into receivership and fire sales of assets began.

Mr Kirch was so outraged by Mr Breuer's comments that he claimed the banker was personally liable and demanded 5 billion euros in damages from him and Deutsche Bank - apparently the cost of losing his whole empire.

Judge Nobbe said that the personal claim against Mr Breuer "did not look too good" but that Mr Kirch's claim against Deutsche Bank was justified because Germany's banking secrecy laws had been broken.

He also observed that Kirch Media's lending terms did worsen as a result of Mr Breuer's comments.

However, Judge Nobbe suggested that Deutsche Bank's maximum liability was likely to be limited because it lent to only one Kirch Media subsidiary, to which it provided 700 million euros, not to the group as a whole.

This would limit its liability to an estimated 500 million euros.

Even if Mr Breuer's remarks resulted in damages of "only" 100 million euros, as some legal experts have suggested, this will still be a blow to Deutsche Bank's image.

- INDEPENDENT