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Deutsche Bank Chief Loses in Battle of Corporate Giants

A Munich court has ruled that Deutsche Bank executive Rolf Breuer is liable for public comments he made in 2002 on the financial health of the Kirch Media Group. Damages could run into hundreds of millions of euros.


Deutsche Bank's Rolf Breuer: guilty as charged

The case pitted Germany's largest bank against the country's one-time most powerful media conglomerate, which last year collapsed into ruins. According to Kirch's founder and head, Leo Kirch, it was Rolf Breuer -- former Deutsche Bank chairman and current supervisory board head -- and his comments made in a television interview last year, which caused the downfall.

In the interview with Bloomberg Television in February 2002 , Breuer had questioned the the financial stability of the Kirch Group, which was buckling at the time under a massive debt load and looking for ways to pay its creditors.

Leo Kirch

According to Leo Kirch (photo), Breuer's comments helped precipitate the collapse of his media empire and amounted to a serious betrayal of business secrets as well as an unauthorized disclosure of the Kirch Group's credit lines. Kirch opened proceedings against Breuer in May, suing him and Deutsche Bank for €100 million, saying Breuer's comments had caused other banks to refuse him badly needed credit to stave off insolvency.

On Tuesday, a Munich judge sided with Kirch, ruling that Breuer is liable for his statements and should pay damages. The court said it would rule on the amount of compensation at a later date. Sources close to Kirch said he could raise his damage claims to "more realistic" levels" that could reach into the billions.

"Death blow"

Kirch's lawyers argued in front of the court that Breuer's statements constituted a "death blow" for the then-struggling media empire, which has since gone into insolvency. Breuer had been asked in the interview two months before the Kirch insolvency, whether banks were willing to come to the aid of the struggling media group. "What one is reading and hearing is that the financial sector is not prepared to supply further funds or outside resources," Breuer said at the time.

That, according to Judge Helmut Lieber, was a clear offense against confidentiality agreements between client and bank.

For their part, Deutsche Bank's lawyers argued that Breuer's comments contained nothing that was not already widely known in the financial community. They have vowed to appeal.

"We are convinced that the judgement is flawed in several respects," Peter Heckel, lawyer for Deutsche Bank, told Reuters. "We are still confident of the final conclusion."

Several German legal experts said they were surprised by the court's ruling and predicted the chances were good that Deutsch Bank would see it overturned on appeal.

Bad week for Deutsche Bank

The judgement against the German banking giant comes just two days after prosecutors in Düsseldorf charged management board head Josef Ackermann of breaching shareholders' trust by awarding excessive payoffs to managers of telecommunications company Mannesmann when it was bought by Vodaphone in 2000. Ackermann was a member of the Mannesmann supervisory board at the time.

If Tuesday's ruling is upheld, it could signal the end of Breuer's high-profile career in German banking. He became a symbol of corporate Germany's transformation in the 1990s, when the country's banks broke with tradition and showed reluctance to bail out large companies in trouble.

While Deutsche Bank stocks fell slightly after the ruling became public, bond investors seemed to largely shrug off the news. It could only become serious for the bank if a settlement with Kirch is much larger than anticipated, traders said.

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