Arcandor Middelhoff
June 12, 2009
Angelika Matthiesen, senior public prosecutor for the city of Essen where Arcandor is headquartered, said on Friday that her office had decided to open a formal investigation into the business dealings of former Arcandor chief executive Thomas Middelhoff after completing a preliminary inquiry earlier in the week.
The fraud allegations against Middlehoff and his wife are connected to their involvement in a real estate scheme that saw Arcandor pay higher-than-market prices to rent store space.
Arcandor, which owns the Karstadt chain of department stores, filed for bankruptcy last week. Middelhoff resigned as CEO of the company on March 1 of this year and was replaced by Karl-Gerhard Eick.
Middelhoff often under fire
There was much criticism of Middelhoff in the past at annual shareholder meetings due to his equity stake in Karstadt's real estate holding company through a bank fund.
Before Middelhoff joined Arcandor in 2004, which was still known as KarstadtQuelle at the time, he and his wife had a significant number of shares in their portfolio of the Oppenheim-Esch Fund, operated by the private bank, Sal. Oppenheim, and its project developer Josef Esch, which, in turn, held shares of Karstadt's real estate company.
Middelhoff is alleged to have brokered deals in which Karstadt paid excessive prices for real estate.
State prosecutors are now closely examining the links between Middelhoff, the Oppenhiem-Esch Fund and Arcandor's real estate deals.
Middelhoff has always maintained that there was no conflict of interest and that the benefit to Arcandor always had priority.
gb/ dpa/AP/Reuters
Editor: Sonia Phalnikar