Just weeks after Handelsblatt reported that Dutch construction firm Imtech set up a cartel to help win contracts to build two power stations, four of its German offices have been raided by investigators.
Imtech’s offices in Aalen, Hamburg, Munich and Stuttgart were searched by officials from the public prosecutor’s office, assisted in some of the locations by representatives of the German federal cartel office, Handelsblatt has learnt.
The raiders brought search warrants from a Munich court citing “suspicion of anticompetitive agreements and other things” relating to its deals with energy giant RWE.
The move came just three weeks after Imtech released a statement saying that an internal investigation had cleared it of violating competition laws. The threat of a fine that could amount to hundreds of millions of euros now hangs over the firm.
The cartel claims first came to light in November when Handelsblatt and the Dutch paper De Telegraaf reported price-fixing agreements and other irregularities in the bidding for construction work on the power stations in Eemshaven, The Netherlands, and Hamm, northern Germany, between 2008 and 2010.
The threat of a fine that could amount to hundreds of millions of euros now hangs over the firm.
The suspicion is that Imtech set up a cartel in which its partners falsely invoiced the company so that it could overcharge RWE. This would have guaranteed that the job was awarded to Imtech, and that its partners would get a slice of the pie through phony billings.
The cartel partners consisted of companies belonging at the time to Ferrostaal, Caverion and Cofely. Some have already admitted to working with false invoices.
Imtech earned an astoundingly high profit on the projects. But, following the publication of the expose, RWE checked the power plant sites and failed to find any evidence of the invoiced items or services. This led it to contact the German federal cartel office, which launched an investigation.
The fact that the cartel was exposed in the press before German authorities began investigating it has left the alleged culprits in an awkward position. The first company that reports itself to the cartel office can expect leniency, possibly to get off with a fine. But there is a narrow window of opportunity for this course of action.
All the affected companies claim they have done everything possible in the past weeks to gain an assessment of the matter and cooperate with the authorities.
But it is questionable whether any of the firms can expect a sympathetic hearing. The process will be complicated by the fact that the subsidiaries involved have been sold since the time of the alleged crime. For example, after the accusations became known, Ferrostaal divested itself of its offending subsidiary.
The cartel office could impose a fine amounting to ten percent of a company’s sales.
According to the Munich public prosecutor’s office, 50 objects were sifted through during the raids, 18 relating to the four companies. A representative of Imtech said that the names of nine other companies and their managers were on the search warrant. The whole sector is apparently under suspicion.
The public prosecutor’s office and the German federal cartel office would not comment yesterday. “Due to ongoing investigations and the fact that it may also possibly be a matter of a fiscal offence, binding our office by tax secrecy, we can make no further statements,” said senior public prosecutor Thomas Steinkraus-Koch.
The whole sector is apparently under suspicion.
The number of accused is “at the moment in the lower double-digit range,” he said.
The scandal is quite a comedown for the once high-flying Imtech.
For many years, its German business operations were considered the jewel in the company’s crown. Even during the global economic crisis, Klaus Betz, the head of Imtech Germany, consistently delivered enviable returns. Sales rose while earnings remained above average.
But it was revealed to be a fantasy world.
In early 2013, business operations in Germany collapsed. Imtech blames the downfall on the fact that its German subsidiary kept two accounting books, one reflecting reality and the other intended for the top executives at company headquarters in the Dutch city of Gouda.
It was even possible for employees to list a €100 million contract to build a huge adventure park in Poland – supposedly the largest contract in the company’s history — that didn’t exist. In fact, the company didn’t even have a building permit.
As a result of the chaos, Imtech lost €2 billion ($2.3 billion) in value on the stock market, 1,000 employees were laid off and 70 percent of its management team in Germany replaced. Mr. Betz was fired and later charged with fraud, breach of trust and other offences.
Simply writing down the problems swallowed millions. Hungry for a cash infusion, the company hoped to raise some €600 million on the capital market, but collected only half that amount. Participating banks ponied up the rest, which means Dutch financial institutions including Rabobank, ABN Amro and ING Groep NV have now joined the German bank Commerzbank as major shareholders in the scandal-plagued company.