The new allegations in the Causa Signa

The Bavarian police authority has confirmed that investigations into the financial dealings of real estate group Signa have uncovered allegations of misappropriation of over 300 million euros and potential fraud against the Raiffeisen Bank International (RBI). The case involves René Benko, former head of Signa’s German operations, and seven ex-employees, who face charges of breach of trust and credit fraud. The Munich prosecutor's office, specifically the 18th district, is handling the case, which includes two recent reports from the Bavarian Criminal Police Office (Landeskriminalamt). According to the latest findings, internal financing methods within Signa were scrutinized, with investigators referring to the company's structure as a “vacuum cleaner” due to how funds were moved between subsidiaries. The process reportedly allowed the parent companies, such as Signa Prime or Development, to absorb unused capital from project companies, thereby addressing liquidity issues. This method was allegedly used in the Munich “Project Franz,” involving the redevelopment of properties near the city’s main train station. The state-owned Saudi Arabian Public Investment Fund (PIF) invested 187 million euros in this project, which the accused allegedly misused by channeling the money to Signa Prime, which spent it in April 2022. In another aspect of the investigation, the focus shifted to the “Old Building” part of the project, where the accused allegedly engaged in credit fraud. In August 2022, 120 million euros were transferred from a German company interested in purchasing the property. The plan was for the building to be renovated and subsequently leased back to Galeria Karstadt Kaufhof (GKK) as a tenant. However, according to the prosecutors, Signa did not intend to sell the property or convert it into retail space but instead aimed to develop office spaces. The funds were reportedly used for a capital increase through the Signa Holding, described by the investigators as a covert bridging finance. Simultaneously, Benko initiated discussions with the RBI in June 2022 regarding a 120-million-euro loan for the old building. During these talks, the bank asked whether Signa would retain ownership of the property after the renovation. Despite having a contract with the German tenants, the answer given was affirmative. By Christmas, the loan was approved, though the terms required that the lease agreement with GKK remain active without prior approval from the RBI. A RBI banker testified that maintaining the lease was crucial for the bank, stating, “Of course, it was essential for the RBI that the property was rented after the renovation.” Whether the loan could have been granted without the lease agreement remains unclear, with the banker suggesting it likely would not have been possible. Further evidence suggests that the termination of the lease agreement had already been decided. By late September, GKK received notice of its eviction, and by December, it was informed of the planned conversion of the building into office space. However, the RBI bankers were kept in the dark until mid-January, when Benko, according to notes from an ex-Signa manager, withheld this information. He delayed informing them of the decision, even as the funds were being disbursed.