After the bankruptcy of the Signa Group and the department store subsidiary Galeria, the public prosecutor’s office became involved. Investigations are now also underway against those responsible for the department store group.
The Galeria department store group is not calming down. After what is now the third bankruptcy, thousands of employees have to fear for their jobs, and numerous branches are threatened with closure. The responsible managers are now also coming into focus. Since the end of February, the economic crime department of the Bochum public prosecutor’s office has been investigating those responsible for the Galeria Karstadt Kaufhof department store group and two other people on suspicion of breach of trust and other crimes. According to the public prosecutor’s office, it is currently being examined whether there is a connection with another investigation that has been underway against Galeria managers since the beginning of 2023.
The investigations are related to the department store group’s second insolvency at the end of October 2022. The public prosecutor’s office does not want to provide any further information, saying the investigations are only at the beginning. The Bochum public prosecutor’s office is commissioned by the public prosecutor’s office as the main department for economic crimes when particularly extensive proceedings are involved.
Since the department store group was taken over by the Austrian Signa Group in 2019, the traditional company with 15,500 employees has now been insolvent for the third time. During the corona pandemic, Galeria received 680 million euros in government aid, even though the company had already been in considerable economic difficulties.
Suspicion of money laundering
The Munich I public prosecutor’s office has also been investigating those responsible for entrepreneur René Benko’s Signa Group, which is now also insolvent, since November 2023 on suspicion of money laundering. The background to the investigation is a real estate project around the former Galeria building on Munich’s Bahnhofplatz.
The construction project “Munich’s New Center” was to be built there for around one billion euros. Apparently there were problems with the financing of the project and questionable donors. In March 2022, the state investment fund of Saudi Arabian Crown Prince Mohammed bin Salman participated in the construction project with a bond worth 187 million euros. Bin Salman is criticized for human rights violations and it is also suspected that he was involved in the murder of dissident journalist Jamal Khashoggi.
Allegation of possible loan fraud
Benko’s Signa Group is also said to have deceived banks by providing inflated information about future rental income in order to obtain higher loans and better conditions. This leads to the accusation of possible credit fraud. When asked, the public prosecutor’s office in Munich said that the matter was also being examined with regard to possible other crimes.
Payments worth millions from the real estate business were then transferred abroad via a Luxembourg subsidiary. The investigation is based on several reports of suspected money laundering that have been received by the Munich public prosecutor’s office since the end of last year. Benko’s lawyers describe the allegations as baseless.
Extensive investigations
The statement from the Munich public prosecutor’s office shows that other investigative authorities in Germany are also involved in the case. According to research by the WDR (ARD-Story “René Benko the gambler and politics”), the Signa Group regularly artificially inflated rents and property values in its transactions.
For example at the Kaufhof headquarters in Cologne, Hohe Straße. The historic building is one of the largest department stores in Germany and was acquired by the Signa Group in 2019. At that time, the property was on the books for 147 million euros. With the purchase, the Signa Group increased the value of the property on its balance sheets to a whopping 521 million euros and took out a new bank loan of 200 million euros.
In line with the enormous increase in the balance sheet of the property, the long-term rents to be paid by Galeria to the Signa Group also increased. Between 2019 and 2022, rent payments increased from 15.8 million euros to 19.5 million euros per year, despite the department store group going bankrupt twice. The rental burden was therefore more than 30 percent of sales – around ten percent of sales is usual in the market. The Signa Group justifies the constantly rising rents and property values with the alleged “development potential” of the buildings.
Unrealistic “Development potential”
In the case of the department store on Kölner Hohe Straße, the annual financial statements state: “As part of the planned project development, the feasibility study regarding an increase in the listed building by at least two floors was completed and a concept for the neighboring parking garage was developed. The plans include the conception of a self-sufficient parking garage Developments to the existing department store, ie a solitary high-rise building with office and/or residential use.”
In fact, such “development potential” is unrealistic, because the listed department store is located just a few hundred meters from Cologne Cathedral, which is a world heritage site and belongs to a protected area in which no high-rise buildings are allowed to be built.
Nested Corporate network
The Signa Group’s real estate deals took place through a nested and tax-optimized network of companies in Luxembourg. Money generated from the marketing of Galeria department stores flowed to specially founded companies that reside in an inconspicuous office building at Luxembourg airport. INGBE Beteiligung Sarl is also located here. The company is named after Benko’s mother Ingeborg and received more than 136 million euros in advance dividends from deals with department stores in Berlin, Hamburg and Stuttgart in 2016 and 2017 alone.
The Luxembourg company in turn belongs to the INGBE Foundation based in Liechtenstein. Benko also has other discreet foundations, such as the Benko Family Foundation and the Laura Private Foundation, named after his first daughter. Both are based in Austria. Through these foundations, Benko’s family is involved in numerous companies and real estate projects. The dividends ended up abroad.
René Benko, who was legally convicted of corruption in Austria in 2014 and against whom another investigation is currently pending for bribery of a high-ranking tax official in Vienna, recently filed for personal bankruptcy as a sole proprietor. But creditors will have difficulty getting hold of the foundation’s assets. Because René Benko is not the beneficiary of his foundations, but rather his family.