Tuesday, April 21, 2009

Dresdner Bank Is Sued by Former Capital Markets Head

Dresdner Bank AG, the unprofitable lender acquired by Commerzbank AG, was sued by the former head of capital markets at its investment banking unit over his severance pay.

Jens-Peter Neumann, who left Dresdner Kleinwort after the January takeover by Commerzbank, was seeking 1.5 million euros ($1.9 million) from the Frankfurt-based bank at a German court hearing today. Under a January agreement to end his employment contract, Neumann received a bonus payment of 3 million euros. He claims he’s also entitled to an additional severance payment.

Compensation for bankers has become contentious after the financial crisis forced governments to use taxpayer money to prop up lenders. Dresdner in-house lawyer Matthias Woldter told the Labor Court that Neumann can’t seek the severance payment because his unit contributed 5.7 billion euros to the investment bank’s record 6.3-billion-euro loss last year.


“The losses were incurred especially at the unit Mr. Neumann headed,” Woldter said. “His duty was to care for its short-, medium- and long-term profitability. He significantly failed in bringing that about.”

Tanja Karhausen, Neumann’s lawyer, said that the payments were due independently of the 2008 results.

‘Full Swing’

“When my client and Dresdner negotiated, the work on the 2008 annual report was already in full swing,” Karhausen told the court.

Because of the 2008 results, the agreement negotiated between the bank and Neumann lost its “material basis” and needed to be adjusted, Woldter claimed. Dresdner explained this to Neumann in a letter dated Feb. 26 without getting a reply, Woldter said.

After both parties declined to settle the case, Judge Klaus Koettinger scheduled a hearing for Aug. 6.

Neumann joined Dresdner Kleinwort in April 2006, after working for UniCredit SpA’s German unit HVB Group, Goldman Sachs Group Inc. and Credit Suisse First Boston.

Dresdner Bank granted management board members about 58 million euros in compensation last year even after posting a record loss, according to its annual report. Germany’s Bild newspaper branded the executives “greedy fat cats.” Commerzbank said in February it decided to cut bonuses by 90 percent for Dresdner Kleinwort bankers after it had informed staff in December of their provisional awards.

“It’s not justifiable to sue for a bonus or severance pay after such a bad performance,” said Wolfgang Gerke, president of the Bavarian Center of Finance in Munich, before the hearing. “Dresdner Bank executives caused huge losses and deserve a penalty, not a bonus.”