Why Didn't the Germans Notice Their Own Enron?

If you follow business scandals, as I do, you’ll notice that a good many of the largest take place outside the US. There are constant reports from Japan, China, Africa, and elsewhere. In Europe, Italy’s Parmalat scandal got a fair bit of attention, among others.

So it was rather a shock to read this Newsweek article about the dramatic collapse of a large state-owned bank due to poorly chosen investments in real estate deals that went ahead without the usual scrutiny.

What’s really disturbing is that people knew about this all the way back to 2000. German taxpayers are left holding the bag underneath the rubble of Bankgesellschaft Berlin (BGB). The first trials of the company’s executives began last month.

Noting that the Enron debacle helped push through Sarbanes-Oxley and other reforms, Newsweek expresses its surprise that…

In Germany the response has been almost the opposite—public indifference and an official response that, at best, has been tepid and, at worst, amounts to a deliberate effort to enshroud the case in “extreme secrecy,” according to corruption watchdog group Transparency International.

We had our own bank scandal based on “handshake” approvals for real estate deals here in Western Massachusetts about 15 years ago, and it took down one of the largest regional banks. The beautiful Northampton main branch, once the corporate headquarters, still remains vacant after more than a decade. But there was no shortage of reporting about it, and I think that made the banking community stronger—because the community wanted to protect itself from such a thing happening again.

The article goes on to criticize the secretive German business structure that makes it hard to investigate or reform. Something German citizens who care about these things may want to change.

Interestingly enough, I haven’t had a single signer of the Business Ethics Pledge from Germany. Any Germans want to step up and be first?