Banker, Gadfly, Lawyer, Spy

Authorities Probe a Web of Intrigue at Deutsche Bank

By DAVID CRAWFORD and MATTHEW KARNITSCHNIG

Michael Bohndorf, a gadfly shareholder, was spied on in Spain by Deutsche Bank agents.

MUNICH -- A young woman appeared at the offices of a small law firm here three summers ago to interview for a job as a lawyer. After impressing one partner, she was invited back to speak to the lawyer handling one of the firm's most important cases, a multibillion-dollar lawsuit against Deutsche Bank AG.

The partner and the young woman discussed the case for nearly two hours, according to people familiar with the meeting. When they finished talking, the partner offered her a job.

German authorities are now investigating whether the woman, German law graduate Traudel Schmitt, already had a job -- as a spy for Deutsche Bank, according to people close to the probe.

The suspected attempt to infiltrate the law firm, Bub, Gauweiler & Partner, is part of a complicated spy tale involving Germany's largest bank. The cast of characters also includes a gadfly Deutsche Bank shareholder, an apparent Brazilian seductress and a list of about 20 alleged spying targets. Frankfurt prosecutors, government privacy-law officials, and Germany's banking regulatory agency, Bafin, are all investigating the affair.

Any evidence that Deutsche Bank secretly gathered information on the major lawsuit, filed by onetime media mogul Leo Kirch, would mark an escalation in the scandal, which has already touched Deutsche Bank's boardroom and raised questions about regulatory oversight of the bank. The young woman who interviewed for the law-firm job, who now goes by her married name, Traudel Blecher, declined to comment.

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Deutsche Bank has acknowledged that its employees dispatched agents as far as the Spanish Mediterranean to spy on various people. It said last month that it had identified several incidents of spying between 2001 and 2007, and that it fired two midlevel executives. The bank also said there was no evidence to suggest that senior management was involved or that the activity was "systemic" in nature.

After Deutsche Bank disclosed the matter in May, it commissioned New York law firm Cleary Gottlieb Steen & Hamilton LLP to undertake an internal investigation. In July, Cleary submitted to Deutsche Bank's board a roughly 180-page report, portions of which were reviewed by The Wall Street Journal. Relying on interviews and documentary evidence, Cleary concluded that while bank officials may have breached Germany's privacy laws, they didn't commit any major crimes.

Deutsche Bank said last month that Cleary found four incidents involving "questionable investigative or surveillance activities."

Three of the four cases are relatively minor, involving either an attempt to safeguard proprietary information or ensure the safety of senior staff, according to the law firm. The fourth is the focus of German authorities.

That operation began just after Deutsche Bank's annual meeting in June 2006, according to the Cleary report. During that meeting, Michael Bohndorf, a litigious shareholder, had questioned the legitimacy of the bank's new chairman, Clemens Börsig. Mr. Börsig's election, Mr. Bohndorf alleged, had been improper.

Associated Press and AFP/Getty Images

Left to right: Former media mogul Leo Kirch; Deutsche Bank Chairman Clemens Börsig; lawyer Peter Gauweiler.

It wasn't Mr. Bohndorf's first tangle with Deutsche Bank. A retired Hamburg attorney, Mr. Bohndorf had been the bank's most persistent gadfly, peppering management with uncomfortable questions at annual meetings and filing lawsuits challenging everything from executive bonuses to the appointment of directors.

Difficult shareholders are a fixture at such meetings in Germany. In Mr. Bohndorf's case, his doggedness and willingness to go to court made him impossible for Deutsche Bank to ignore.

After the meeting, Mr. Börsig, the chairman, asked the bank's head of investor relations, Wolfram Schmitt, to look into Mr. Bohndorf, Deutsche Bank has said. Mr. Börsig was particularly interested in finding out whether Mr. Bohndorf was working with Mr. Kirch, the former media mogul, the Cleary report says.

Mr. Kirch and Deutsche Bank had been battling one another in German courts since 2003. Mr. Kirch alleges that former Deutsche Bank Chief Executive Rolf Breuer improperly pushed the Kirch media empire into bankruptcy in 2002.

In February of that year, Mr. Breuer gave a television interview in which he said it was "questionable" whether Mr. Kirch would be able to refinance billions of euros of debt. Within weeks, the Kirch Group filed for bankruptcy protection. Mr. Kirch sued the bank, one of his major creditors, arguing that Mr. Breuer had violated German laws that prohibit bankers from making public statements about the financial situation of their clients.

In January 2006, just months before the annual meeting during which Mr. Bohndorf challenged Deutsche Bank's chairman, Germany's highest civil court ruled Deutsche Bank should compensate Mr. Kirch for some of the losses he suffered. That case, in which Mr. Kirch has sought billions of euros in damages, is pending.

After the bank's chairman requested information about Mr. Bohndorf, the gadfly shareholder, Deutsche Bank's head of investor relations, Mr. Schmitt, contacted the bank's head of German security, according to the Cleary report. Soon thereafter, they brought in Bernd Bühner, a former German Army security officer who runs a private-detective agency, the report says.

Mr. Bühner was asked to figure out whether Messrs. Bohndorf and Kirch were working together, according to the report. Mr. Bühner says bank officials also handed him a list of about 20 other investigative targets, including the law firm handling Mr. Kirch's suit, Bub Gauweiler. He says he put together a plan involving two teams, code-named Team Deutschland and Team Balearia.

In July 2006, Mr. Bühner activated his agents, according to both the Cleary report and Mr. Bühner, in an interview. Team Balearia was dispatched to Ibiza, a Spanish island in the Mediterranean where Mr. Bohndorf owns a home.

A few weeks later, Mr. Bohndorf says, he was sitting in an outdoor cafe when a Brazilian woman sat down at a neighboring table. "This is such a romantic island," she said, smiling at him, Mr. Bohndorf recalls. She introduced herself as Adriane.

"She was 23, and I was 66," Mr. Bohndorf said in a recent interview at Bar Es Canto, the cafe on Ibiza where he says he first met the young woman. She told him she was a student, he says, and "asked lots of unusual questions about my work and my home."

A weeklong romance ensued, Mr. Bohndorf said. He gave her a total of €100 after their liaisons, as "taxi money," although she didn't ask for anything, he says. Then she disappeared without saying goodbye, he says, and without leaving him any phone number or email address. Mr. Bohndorf says he believes the romance was part of Deutsche Bank's operation to gather information on him, because the woman asked many questions about his work and the photos in his home, and fiddled with his belongings.

Later, when lawyers from Cleary interviewed Mr. Bohndorf, he didn't mention the young woman. In the wake of German media reports about the matter, Cleary looked into it, but turned up no evidence of any Brazilian woman being involved in the investigation, according to the firm's report. Mr. Bühner said in an interview that he did not send the woman to Ibiza.

Cleary did find evidence that Deutsche Bank sent agents to Mr. Bohndorf's retirement home in Ibiza that summer. A Deutsche Bank official sent Mr. Bühner a link to an online ad offering Mr. Bohndorf's property for rent. Mr. Bühner says he forwarded the address to one of his agents with the comment: "you can go on holiday." The agent, he says, rented the house.

While Team Balearia was busy casing Mr. Bohndorf's home, Team Deutschland was undertaking another operation in Munich, according to people familiar with the matter.

The Cleary report says the plan, which was "authorized" by at least one Deutsche Bank official, was to insert "an attractive young female lawyer" as an "intern" into Bub, Gauweiler, the law firm handling Mr. Kirch's case. The goal, according to Cleary, was to figure out if there was a link between Messrs. Kirch and Bohndorf.

The report says the young woman was interviewed and offered a position at the law firm, but that Deutsche Bank decided to end the operation before she began the job. In the report, Cleary said it was unable to identify the woman. But Frankfurt prosecutors are weighing evidence that Ms. Schmitt was acting as an agent for Deutsche Bank, according to people familiar with the investigation.

On July 1, 2006, Ms. Schmitt responded to an ad in Süddeutsche Zeitung, a local newspaper, seeking a lawyer to work at Bub Gauweiler, these people say. The ad, which appeared in the paper's Saturday jobs section, said that the firm was looking for a "lawyer to assist one of our partners in the area of corporate and banking law." The ad said that the position would put the successful candidate on track to become a partner.

On the morning of July 20, Ms. Schmitt arrived at the firm for an interview. Wolfgang Bub, the partner who conducted the initial interview, was impressed with the young lawyer and recommended that she speak directly with the partner running the Kirch case, Franz Enderle, according to records reviewed by the Frankfurt prosecutors.

Ms. Schmitt returned to the firm on Aug. 3, the records indicate. For about two hours, Mr. Enderle discussed the Kirch case with Ms. Schmitt, according to someone familiar with the conversation. During the discussion, he provided her with background information on the case, including his assessment of how the litigation was progressing, this person says. Mr. Enderle and Ms. Schmitt also discussed the firm's strategy in preparation for the bank's annual shareholder meetings, the person says.

"This is information that would be important for the bank," the person says. Mr. Bohndorf, the troublesome shareholder, was discussed, but only briefly, the person says.

At the end of their chat, Mr. Enderle told Ms. Schmitt that he would like to hire her, and the two discussed her salary, the person says.

Six days later, Deutsche Bank officials held a conference call to discuss its operation and decided not to proceed, according to the Cleary report.

On Aug. 17, Bub Gauweiler sent Ms. Schmitt a written job offer to join the firm as a lawyer, according to an email reviewed by the Journal. Ms. Schmitt responded on Aug. 22, saying she had decided to accept another position in Berlin.

The Cleary report says that there is "no indication" that Deutsche Bank's agents sought or received information on Mr. Kirch's legal strategy. The report says that the only mention of Mr. Bohndorf by Bub Gauweiler lawyers during the young woman's interview was when one of them said that the shareholder was a "hanger-on," riding Mr. Kirch's coattails.

"As a result it can be determined that none of the participants in the Bub Gauweiler incident committed a crime or civil offense," Cleary concluded.

But Peter Gauweiler, a senior partner at Bub Gauweiler and a member of the German parliament, maintains that the evidence suggests that Deutsche Bank managers were "involved for weeks in an organized criminal activity. The incidents must be and will be fully investigated."

Deutsche Bank declined to comment on his statement. The bank said it has "no reason to doubt that the independent investigation was thorough," and that it is "awaiting the results" of the investigations by authorities.

Ms. Schmitt, who resides in Munich and now uses her married name, didn't respond to several requests for an interview.

A man at her residence who identified himself as her husband, Michael Blecher, told a reporter: "My wife will definitely not want to have any contact with you."

On Sept. 12, 2006, Mr. Bühner, the private investigator, met with Deutsche Bank officials at the bank's Frankfurt headquarters to present his findings, according to the Cleary report.

In attendance were Mr. Schmitt, the bank's head of investor relations, Rafael Schenz, then head of security in Germany, and Wolfgang Schnorr, then deputy head of investor relations.

The Cleary report identifies another executive whose participation hasn't been previously disclosed: Reinhard Marsch-Barner, then head of Deutsche Bank's legal department.

Mr. Marsch-Barner, who played a key role in the bank's defense in the Kirch case before leaving in 2008, was the senior-most Deutsche Bank executive to have direct knowledge of the operation, according to Cleary's findings.

Mr. Marsch-Barner, who now works for Linklaters LLP in Frankfurt, said in a telephone interview that he couldn't recall the 2006 meeting. "It's too far in the past," he said.

According to the Cleary report, Mr. Bühner showed the group pictures of the interior and exterior of Mr. Bohndorf's house on Ibiza and went over the operation. He used a computer disk containing details. The Cleary report said no such disk can now be found.

—Almut Schoenfeld contributed to this article.

Write to David Crawford at david.crawford@wsj.com and Matthew Karnitschnig at matthew.karnitschnig@wsj.com