“In 36 years of criminal defense experience, I have never seen a public prosecutor wait so long,” says lawyer and FDP politician Wolfgang Kubicki. He represents English investors and criticizes the behavior of the Hanover public prosecutor in the case of the German Property Group. The public prosecutor’s office is investigating suspected investment fraud and the delay in bankruptcy. In the summer of 2020, the German Property Group filed for bankruptcy. This scandal does not only affect investors all over the world, but also municipalities in Bavaria.
Take Bad Aibling, for example: People have been wondering about the real estate company German Property Group (GPG) for a long time. Part of the listed old brewery on the Kellerberg has been falling into disrepair for years: GPG, formerly the Dolphin Trust, announced a renovation. The company bought the property in 2015, but nothing has happened since then. Mayor Stephan Schlier and the community have to watch the building keep coming down: “You’re angry and at the same time powerless, our hands are tied.”
GPG did not commission a feasibility study until the beginning of 2020, but a few months later contact with the owner was lost. Since then, nothing has been heard from this company in Bad Aibling.
Lucrative business model
Bayerischer Rundfunk has been researching together with colleagues from for almost two years HR, MDR, NDR, BBC and Süddeutscher Zeitung on the business of the German Property Group. It all started in 2008 in Hannover Langenhagen. The businessman Charles Smethurst founded the company Dolphin Capital, which is now called Dolphin Trust and since 2019 German Property Group. The GPG pretended to be a specialist in the development of listed properties around the world and collected money from foreign investors for their purchase. GPG advertised to renovate the building and sell it on at a profit. The foreign investors should then get their money back including a high return of up to 15 percent.
However, according to our research, many of the listed buildings have not undergone any visible renovation years after their purchase. In Augsburg, for example, around 50 apartments have been waiting to be completed for years. In Reichertshofen near Ingolstadt, the listed mill, the landmark of the place, has been falling into disrepair for years. According to an estimate, the company should own between 60 and 100 properties in Germany.
Investors around the world are waiting for their money
While Germany is apparently not being restructured, investors worldwide are waiting for their investments to be repaid. Like Mark Hambling. The Briton gave the German Property Group a lot of money. Now he is afraid of never seeing it again: “I felt absolutely safe. Germany has a reputation for having very correct bookkeeping here. What could go wrong there?” A total of around one billion euros in investment money is said to have been raised, the whereabouts of several hundred million euros in investor money is currently unclear.
Investors’ money flowed into a confusing network of companies, of which there are said to be more than 200. Investor funds have been shifted between these companies, and the flow of money is completely confusing. The provisional insolvency administrator Gerrit Hölzle stated that he had found “unsorted, in many cases outdated and incomplete data.” It is therefore difficult to understand how the investors’ funds were used. The current insolvency administrator of GPG does not currently want to comment publicly on the proceedings.
What happened to investors’ money?
According to research by NDR, BR and SZ, many people in and around the German Property Group have benefited from investors’ money over the years. Financial intermediaries are said to have received commissions of up to 20 percent for their services. In some cases even more money is said to have flowed to the brokers. Founder Charles Smethurst has granted himself private loans of around 3 million euros. And: After research, he has apparently pumped money into the fashion business and the TV shopping channel of his wife Manou Lenz over the years. Documents suggest that at least nine million euros, allegedly investor money, should have flowed into their business. We have no evidence that the woman knew about her husband’s business conduct. The couple left unanswered questions about these cash flows.
The role of the supervisory authorities
The German Property Group had apparently been in financial difficulties for years. In the documents available to us, a tax advisor suspected at the beginning of 2019 “that the company may have been and has been over-indebted since 2015.” However, the business continued for years.
Could German authorities have stopped the GPG? The Munich lawyer Peter Mattil represents investors and says the Federal Financial Supervisory Authority, or BaFin for short, should have taken a closer look. “If someone does banking, that is, accepts loans and promises to repay them, then according to the definition of our laws, that is banking.”
According to Mattil, anyone who does not have a banking license is conducting a prohibited banking business. This should have ended. The BaFin does not comment on the banking business despite multiple inquiries. It is said that four bonds have been checked. Irregularities were not found.
It is noteworthy that more than 700 annual financial statements of GPG companies are apparently missing for the past few years. Dolphin Trust has not had a balance sheet since 2014. And this despite the fact that companies are legally obliged to publish their balance sheets annually. The responsible Federal Office of Justice warned our research several times about disclosure and imposed administrative fines. It is possible that these fines were paid by GPG companies in many cases without a balance sheet being published. As long as the fines are paid, the Federal Office of Justice has no further action, it will inform you on request.
Investigation initiated
Over the years, the Hanover public prosecutor’s office has repeatedly received so-called money laundering reports from banks against the German Property Group. However, the public prosecutor’s office saw no investigation. Criminal charges have also been filed since the end of 2019. The public prosecutor is currently investigating suspected investment fraud and bankruptcy delay. But what has actually happened so far? The files have not yet been backed up. Rather, the public prosecutor’s office has been waiting for months for a full statement from the former managing director of the GPG.
In Bad Aibling one heard of the investigation in Hanover. There, after years of stagnation, the city architect Andres Krämer is finally hoping for a future for the old brewery: “We hope that the auction will take place as soon as possible and that we will find a new investor.”
When this will come is unclear. Many questions are still open. And the whereabouts of hundreds of millions of euros have not been clarified. What comes up again depends on how intensively investigators and insolvency administrators are looking for it.
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