Corruption Probe Board Chaos at Utility EWE

The regional utility in northwest Germany has lost three top executives in five months. Two men tipped for the board are from a division that is the subject of a corruption probe. A supervisory board member also has some explaining to do, Handelsblatt has learned.
Quelle: EWE
EWE, a power grid operator, is under suspicion.

Timo Poppe, 36, is having a meteoric career. He was chosen by Capital magazine last year as one of Germany’s “Top 40 Under 40” in business, politics and society and could be appointed to the management board of EWE, Germany’s fifth-largest utility, on Wednesday, putting him in charge of a firm with 8,000 employees and €8 billion in sales.

That kind of trajectory is unusual in Germany. At present, Mr. Poppe is a management board member at EWE subsidiary SWB, in charge of infrastructure and finance.

But there’s a problem. An internal investigation at EWE, majority-owned by local municipalities, is looking at allegations of corruption in the group's most profitable division, its power network subsidiary EWE Netz, where Mr. Poppe had responsibility for group infrastructure before he joined the SWB management board.

After Handelsblatt broke the news last Friday of the internal investigation, the state prosecutors’ office in the northern town of Oldenburg, where EWE is based, launched a corruption probe.

The company’s own investigation, conducted with the help of white-collar crime specialists from the White & Case law firm, discovered that bribe payments and kickback agreements had been a longstanding tradition at EWE Netz.

Internal documents seen by Handelsblatt refer to “cash payments and envelopes of money.” Evidence was also uncovered of “suspected price fixing with other contractors.” Several auto dealers refused to work with the company, because the company was demanding kickbacks when EWE employees ordered new cars.

Now EWE’s supervisory board is in a dilemma. It is scheduled to meet Wednesday to sort the management chaos that has unsettled the group for months.

The board is expected to terminate the contract of Chief Executive Matthias Brückmann, who is accused of donating €253,000 ($267,000) to the Klitschko Foundation, set up by the superstar boxers Vitaly and Vladimir Klitschko, without following correct procedures.

In September 2016, board member Nikolaus Behr resigned, allegedly for ordering that a worker be spied on. Three months later, his fellow board member, Ines Kolmsee, resigned suddenly.

The supervisory board now wants to appoint Mr. Poppe and Torsten Maus, managing director of EWE Netz, to the group management board. But is that justifiable given that both men had management responsibility for a division that is now subject to corruption allegations?

Research by Handelsblatt suggests that the board would be well advised to be careful. Papers have surfaced that cast a shadow on Mr. Poppe and on a supervisory board member, Heiner Schönecke, whom Mr. Poppe appears to have done a personal favor by helping him to boost his earnings from a biogas plant.

Using one’s position in a supervisory board for personal financial advantage is a delicate issue in corporate law. Franz Tepper, lawyer, Brandi

On Nov. 29, 2013, Mr. Poppe, who at the time held a senior executive position in the infrastructure division of EWE, sent a letter to Mr. Schönecke, who was a supervisory board member of EWE and a deputy district administrator — and therefore in a position to help Mr. Poppe’s career.

“Dear Mr. Schönecke, in our conversation on November 11 you talked to me about your biogas plant and asked me to think about how the result of the plant can be approved,” Mr. Poppe wrote.

Mr. Poppe got on the case. The correspondence showed that he enlisted the services of his own assistant to help boost the efficiency of the biogas plant owned by Mr. Schönecke, a regional lawmaker in the Lower Saxony state assembly for Chancellor Angela Merkel’s conservative Christian Democrats.

He also got the assistant to EWE’s chief financial officer, the head of EWE’s network distribution and other members of staff to help.

Mr. Schönecke’s biogas plant appears to have been considered a highly important matter at EWE. “What is the status on biogas Schönecke?” Mr. Poppe enquired in a message sent on his Blackberry phone after 10 p.m. one night. After he received an answer, he replied: “All good, I only really wanted to know if you’re on it.”

Once his team has amassed all the relevant information, Mr. Poppe wrote to Mr. Schönecke: “I was happy to take up this matter and to have our experts compile a collection of proposals to optimize the plant.”

There followed two densely printed pages with advice on how to achieve a “technology bonus” and other ways to enhance returns. Mr. Poppe said he and his assistant would be happy to answer further questions and indeed they did, with members of Mr. Poppe’s team discussing two biogas plants owned by Mr. Schönecke in May 2014.

The head of distribution at EWE Netz developed a plan with which Mr. Schönecke could squeeze every last euro out of his investment.

How is all this to be interpreted? EWE stressed that Mr. Schönecke was its client and that it had marketed the electricity from his biogas plants. Mr. Poppe doesn’t see any problem either. “I didn’t involve myself personally in a particular way for Mr. Schönecke’s plants or for other plants,” the manager said in response to a Handelsblatt enquiry. He had merely passed on the query “to the appropriate specialists in the company.”

Mr. Schönecke said he had initially turned to the EWE chief executive at the time, Werner Brinker, who had referred him to Mr. Poppe. He sees no problem in the consultation. “These were merely questions on the billing and the operation of a biogas plant whose production capacity was directly marketed by EWE at my request,” he said. He had provided no service in return. A company spokesman said: “In our view the entire procedure was completed utterly faultlessly.”

Compliance experts aren’t so sure. They’re critical of EWE executives dealing with a private matter of an EWE supervisory board member over a matter of weeks.

“Using one’s position in a supervisory board for personal financial advantage is a delicate issue in corporate law,” said Franz Tepper, a specialist in international business law at law firm Brandi. Companies that are serious about compliance avoid business relationships with supervisory board members, he added. They should at least take precautionary measures. “The company’s supervisory board shouldn’t just have been informed of this case,” said Mr. Tepper. “It should also have taken a decision on whether the remuneration for the service is appropriate.”

The fact that there was no remuneration in this case puts EWE on legal thin ice, Mr. Tepper added. The supervisory board should consider removing Mr. Schönecke from his position, he said.

It doesn’t make EWE’s task of solving its management crisis any easier. Mr. Tepper said there was nothing wrong with appointing managers if there’s no evidence that they were guilty of corruption. “But one would have to withdraw them if it turns out that they were [guilty] after all.”

Common sense would seem to dictate that a company should hold off promoting executives from a division that’s under suspicion of corruption. After all, even if they weren’t involved, they bear responsibility if their management abilities are at fault.

EWE declined to comment on the upcoming appointments. A spokesman said: “It’s solely up to the supervisory board, whose role it is to make these decisions, to choose which people are nominated to management roles, and when.”

 

Jürgen Flauger covers the energy market for Handelsblatt, including electricity and gas providers, international market developments and energy policy. Sönke Iwersen leads Handelsblatt's team of investigative reporters. To contact the authors: [email protected] and [email protected]