A court in the German town of Bonn has begun hearings in the insolvency case of utilities discounter Teldafax. Three of the firm’s former executives stand accused of running a Ponzi-like scheme to finance the business.
Teldafax's former senior executives Klaus Bath, Gernot Koch and Michael Josten were facing charges of delayed filing of insolvency, unlawful book-keeping and organized fraud to cover up a bankruptcy, the state court in Bonn announced ahead of opening the trial on Tuesday.
The charges were based on allegations that the Teldafax managers concealed evidence in 2009 of the company's bankruptcy, continuing the business until 2011 to the detriment of its customers.
In 2011, Teldefax,Germany's biggest independent utility at the time, eventually filed for insolvency,
leaving roughly 700,000 of its customers in a bind. The company had offered cheap gas and electricity, but required customers to pay their annual bills in advance. Moreover, accusations had surfaced about shoddy accounting practices and running a business that could only stay afloat by rapidly attracting new customers.
According to the court-appointed Teldafax insolvency administrator, customers held claims totaling 500 million euros ($685 million) against the company at the time of the bankruptcy.
The rapid rise and fall of Teldafax came as Germany liberalized its gas and electricity markets in the early years of the past decade. Former telecommunications provider Teldafax was quickly able to win a market share from the country's big monopoly. However, it failed to pay its bills in 2011, leading Swedish energy giant Vattenfall to block Teldafax from its networks in Berlin and Hamburg. As a result, the company immediately lost 45,000 customers.
uhe/tj (dpa, AFP)