They wanted over a billion – and ended up getting less than 200 million. Shareholders of the Munich scandal bank HRE, which was nationalized in 2009, only receive part of their losses.
Shareholders of the Munich scandal bank HRE have waived a large part of their original billion dollar claim after more than twelve years of legal marathons.
The investors have agreed on comparisons with HRE, which was nationalized in 2009, and will receive 190 million euros, as the federal finance agency announced in Frankfurt on Wednesday. As a model plaintiff, the lawyer Christian Wefers represented the claims of a total of 107 institutional investors.
Biggest loss in the financial crisis
According to the finance agency, the claims for damages are largely settled, the authority put this at “96 percent of the volume of claims pending against HRE”. The near-bankruptcy of Hypo Real Estate was the largest loss event in Germany in the course of the global financial crisis of 2008/09, the estimated damage to the state treasury at the end of 2019 was 15 billion euros.
The federal government had nationalized the real estate bank to prevent insolvency. That is why the finance agency is now in charge of HRE, which has not done any business for years. Accordingly, the state also pays the 190 million euros.
In the crisis year 2009, many HRE shareholders filed lawsuits against the bank after horrendous price losses, accusing them of false capital market information. According to the finance agency, the test case with Wefers was more than 1.4 billion euros – an amount in dispute of around 930 million euros plus the process interest of around 535 million euros that has accrued in the meantime.
The finance agency emphasized that in view of this billion sum, the outcome of the legal disputes for the state treasury and citizens is comparatively favorable: “We consider the settlement reached to be an excellent negotiation result for the financial market stabilization fund and thus for the taxpayer,” said managing director Jutta Dönges.
Plaintiff Wefers was represented by the law firm Tilp, which specializes in test cases, which spoke of a “fair comparison for all sides”. “The HRE case is considered a milestone in the history of German capital market law, as it was the first time capital market law claims by large German and international institutional investors were brought before German courts against a German credit institution,” said attorney Peter Gundermann.
HRE Holding is no longer a bank
The HRE lawsuits have engaged three courts and an unknown number of attorneys over the past twelve and a half years. The dispute began at the Munich regional court and went to the higher regional court of the Bavarian capital in the second instance. In 2014, this largely proved the shareholders right. It was about the question of whether the bank’s board of directors misled the shareholders in several communications in 2007 and 2008 about the poor financial situation.
According to the Higher Regional Court, HRE should have informed investors of impending losses by November 2007 at the latest. However, the Federal Court of Justice overturned this part of the decision last year and referred the proceedings back to Munich. Instead of a new court decision, there are now the comparisons.
Today, HRE Holding is no longer a bank, but only a legal vehicle that brings the legal disputes to an end. The former banking business of HRE was divided into two by the federal government: The bad papers are outsourced to a state bad bank that handles the financial legacy – in recent years even with profits. The listed Deutsche Pfandbriefbank (pbb) continues the healthy part of the business.