Germany's Trial of the Century: Retail Heiress Demanding 1.9 Billion Euros

When German retailer Arcandor (née QuelleKarstadt) went bankrupt in 2009, it marked the end of a company rich in tradition. It also, though, resulted in the ruin of company heiress Madeleine Schickedanz after the collapse of a shady investment deal she made with bank Sal. Oppenheim. Now, she is demanding almost 2 billion euros in damages.

The failure of the company Arcandor will be at the heart of the massive trial which begins on Tuesday. Zoom
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The failure of the company Arcandor will be at the heart of the massive trial which begins on Tuesday.

It was an odd interview. In July 2009, just weeks after the once iconic German retailer Arcandor filed for bankruptcy, Madeleine Schickedanz, formerly one of Germany's richest women and the heir to the company, told the tabloid Bild am Sonntag of her and her husband's sudden monetary woes. "I save where I can," she said. "We have reduced our personal expenses, from groceries to cosmetics and clothes." She also confided in the paper that "we live from €500 to €600 per month. We shop at discounters and get fruit, vegetables and herbs from our garden."

Now, Schickedanz is trying to get back some of the astounding wealth that her family had amassed and then lost when Arcandor, formally QuelleKarstadt, lost in one of the most dramatic company collapses in postwar German history. She is suing the bank Sal. Oppenheim and portfolio manager Josef Esch for €1.9 billion euros in damages. The trial begins on Tuesday in Cologne.

The proceedings promise to be anything but straightforward, though at its core, it has to do with questionable investments made by Schickedanz. She inherited the massively successful mail-order retailer Quelle (which merged with department store Karstadt in 1999) from her father Gustav Schickedanz and lived with her husband in luxury at the family villa near Nuremberg, in addition to owning several other choice pieces of real estate around Europe.

But in the search for the perfect investment to generate even more wealth, Schickedanz claims she followed the advice of Esch, who managed an investment fund under the auspices of Sal. Oppenheim. Esch, she says, pushed her into taking large loans from Sal. Oppenheim, worth hundreds of millions of euros, to massively increase her stake in Karstadt/Quelle, and later in Arcandor. According to the legal complaint, the ultimate goal was the creation of a new investment fund.

A Disaster

Esch, for his part, said in a 2011 interview with SPIEGEL that he merely provided advice and never had operative control over Schickedanz's assets.

Either way, the investment turned into a disaster -- to the point that Schickedanz is even in danger of losing her family villa, which she ultimately was forced to use as partial collateral for one of several loans from Sal. Oppenheim. The company had already been struggling before the deal and the situation didn't improve afterwards, resulting in a plunge in both Arcandor's stock price and the value of Schickedanz's and Sal. Oppenheim's investment. The stock is currently priced at well below one euro cent per share.

For Schickdanz's personal fortune, the result was disaster -- though it seems unlikely that she has had to go on welfare as has occasionally been reported. For Sal. Oppenheim, the result was no better. In late 2009, the once-proud private bank became a full subsidiary of Deutsche Bank, having lost huge sums on the Schickedanz deal. Before Deutsche Bank stepped in, Sal. Oppenheim had been teetering on the edge of collapse.

Befitting such an economic trial of the century, however, Schickedanz isn't just the plaintiff. A few weeks ago, Sal. Oppenheim filed a countersuit. Schickedanz, after all, has stopped paying back the disastrous loans she took from the bank. The Deutsche Bank subsidiary claims that Schickedanz still owes it €580 million.

cgh -- with wire reports

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