Anyone who wants to grasp the dimensions of this procedure only has to watch the judge as she pushes a trolley full of files into Room 7 of the Munich Administrative Court shortly before the start of the hearing. There are only the folders of the disciplinary proceedings against the former treasurer of the city of Landsberg am Lech. The folders with the documents for the criminal proceedings are within easy reach in another room, the judge says a short time later at the start of the trial, and another 40 files are not needed at all.
The proceedings of the treasurer and the city of Landsberg have now been going on for eleven years because of highly speculative and ultimately loss-making derivative transactions. It’s not easy, the judge says, to keep track. The city sued the advising financial institution, and the financial institution sued the city. The chamberlain had to answer before a criminal court. And now the Bavarian state prosecutor’s office, which is responsible as the disciplinary authority, wanted to withdraw his pension because he had been too careless with the city’s assets and had not even properly informed the mayor and the responsible bodies about the highly speculative financial deals.
However, according to the administrative court’s ruling, the 73-year-old will not be deprived of his retirement salary, only reduced by ten percent for 48 months. Should the judgment become final, he can look forward to a substantial repayment: In order to secure any claims, he has only received a 30 percent reduction in salary since 2013.
The core of the allegations against the treasurer are so-called swap transactions, which numerous municipalities made ten to 20 years ago to hedge against rising interest rates on loans. In the Landsberg case, the amount in dispute between the city and the consulting bank “Hauck & Aufhäuser” was set at around six million euros, although the damage cannot be precisely quantified: at least one of the contracts concluded runs until 2034, the chamberlain and his lawyer pointed out Montag pointed out that the city could even benefit from rising interest rates for at least the next few years.
The criminal proceedings against the treasurer for breach of trust were finally dropped after several instances against a fine of 35,000 euros. The city and the bank are still trying to decide who ultimately has to pay for the damage. In the disciplinary proceedings, the state prosecutor accused the retiree of violating the ban on speculation. The city was not only financially damaged, but also for the image.
The defendant and his lawyer countered that the 73-year-old, as treasurer, had received comprehensive powers of attorney from the mayor and the responsible city bodies. He was badly advised by the bank, which had not sufficiently pointed out the risks of derivative transactions. Incidentally, there are no comparable disciplinary proceedings against treasurers from other cities, who also suffered high losses due to highly speculative swap transactions.
As a treasurer, he was classified at salary level A 15 and then A 16, the judge replied. “It’s a position where you don’t forgive much.” He was no inexperienced treasurer, but should have recognized the impending danger. Instead, he accepted them at great risk. The judge found it beyond doubt that he had made mistakes in office.
Mainly because he had not enriched himself personally and no criminal sentence had come into effect against him, the judge did not want to follow the request to cancel his pension as a pensioner. No negative effects on the city were foreseeable for him, otherwise the deal would not have been concluded, said the chamberlain at the end of the hearing. “Who does everything right?” he asked. “But I reject the fact that there was fundamental misconduct.”