Prosecutors investigate IBB execs for Soforthilfe

Did the bank and programme architects do enough to protect against fraud? Politicians say they were followng advice to pay first and worry later.

Ir's harder to get into this building than it was to get <em>Soforthilfe </em>cash.
Ir's harder to get into this building than it was to get Soforthilfe cash.imago images/Stefan Zeitz

Berlin-Berlin prosecutors are investigating five executives of state-run wholesale bank Investitionsbank Berlin (IBB) for breach of trust or aiding breach of trust for their role in the creation of the immediate corona aid for small business owners and the self-employed in March.

Bank CEO Jürgen Allerkamp is part of the investigation, which is looking at whether or not officials placed sufficient safeguards on the Soforthilfe programme that paid out nearly €1.8bln to 212,000 applicants before it was halted in May, Martin Stelter, spokesperson for the prosecutor’s office, said Tuesday.

The investigation could be widened to include the politicians who commissioned the bank to launch the programme: Ramona Pop (Greens), head of Berlin’s economy department and a supervisory board member of IBB, Mayor Michael Müller (SPD) and Matthias Kollatz (SPD), head of the city’s finance department.

Anzeige | Zum Weiterlesen scrollen

“It was clear: If we had made complex procedures, then many of the small, independent businesses would have died,” Kollatz said during a press conference. “Now there are 1,600 cases of fraud. That’s way less than 1 per cent.”

A source at the IBB said the bank is irked by the investigation because the programme has been lauded for its simplicity and how rapidly it got cash into the hands of people who needed it. Berlin politicians said they were following advice from the federal government to pay first and investigate later after most businesses were halted to stave off the pandemic.

The Soforthilfe still receives accolades for its elimination of the usual bureaucracy that is tied to such aid programmes. It transferred an average €8,500 to recipients just days after they filled out a simple online form. The city lacks large industrial and manufacturing employers and instead has become a service metropolis with a particularly high proportion of small businesses and self-employed, especially in the events and cultural industries.

Accountants and websites sprung up at the time to help non-German speaking freelancers in the Hauptstadt apply for the funds but, according to Stelter, the programme has already sparked 2,200 fraud investigations and netted at least one guilty verdict.

At the beginning of July, a 31-year-old entrepreneur with a cleaning service was found guilty of fraud after he founded several companies to wrongly receive €35,000 in emergency aid. He had to repay the cash and was handed a suspended sentence but his defence attorney Andreas Gerlach said Berlin officials also carry some of the blame.

“Suddenly everyone had their pockets full of money,” he said.

Despite the low bureaucratic hurdles, the various iterations of the programme were accompanied by uncertainty. Freelancers and the self-employed only qualified for grants if corona had wiped out income and sales from healthy businesses, leading many to question what constituted “healthy”.

Recipients of the first €5,000 grants from Berlin were also allowed to use the money for whatever they wanted but grants above that or in later versions from the federal government could only be used for operational expenses such as rent or office electricity – expenses many freelancers don’t have.

The uncertainty led some to repay the grants voluntarily. The questions grew in May when IBB began issuing statements of grant awards accompanied by a warning that advised recipients to review their eligibility because fraudulent information could be punished with fines and imprisonment for up to five years.

Freelancers in for a nasty surprise?

The number of repayments then skyrocketed. At the beginning of May, about 4,100 applicants had repaid a total of more than €36mln in aid. By Monday this week, 18,751 applicants had repaid €125.2mln.

A source at the Berlin chamber of commerce said additional freelancers may be in for a partial or full repayment surprise when they do their 2020 income taxes and the Finanzamt determines that they weren’t eligible for the aid.

Economy boss Pop also stands by the Soforthilfe process. In a statement issued in response to an inquiry by the Berliner Zeitung, she said the emergency aid “has so far secured 360,000 jobs in Berlin alone”.