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Police raided more than 20 offices and premises on Wednesday as part of a sprawling investigation into suspected false accounting, market manipulation and breach of trust at controversial German property group Adler Real Estate.
Simultaneous raids in Germany, Austria, the Netherlands, Monaco, Portugal, Luxembourg and the UK involved 21 offices, one law firm and other properties including those of Cevdet Caner, an Austrian property magnate who lives in Monaco.
In Germany alone, 175 prosecutors and officers of the country’s federal criminal police BKA took part, prosecutors said in a press release. Although the release did not name Adler Real Estate or Caner, both confirmed the raids to the Financial Times.
The drastic move by law enforcement authorities marks a major escalation into an accounting scandal at the Berlin-based and Frankfurt-listed real estate group.
Shares of Adler Group, the real estate company’s Luxembourg-based holding company, have nearly been wiped over the past two years, trading at €0.43 on Wednesday. The holding company had lost €2.9bn in market capitalisation in that period.
Adler Group has been unravelling since short selling group Viceroy Research in 2021 accused the company of widespread fraud and inappropriate transactions connected to Caner and Luxembourg-based investment firm Aggregate, one of the company’s investors.
German financial watchdog BaFin last year found that Adler Real Estate, which owns more than 26,000 residential units in Germany, inflated its balance sheet by €3.9bn and its earnings by €543mn in 2019 and filed a criminal complaint against the company.
Earlier this year, the London High Court approved a contentious restructuring plan for €3.2bn in bonds that saved the Adler Group from imminent insolvency.
Frankfurt prosecutors are targeting several individuals aged between 38 and 66 over suspected criminal acts between 2018 and 2020, they said in their press release.
Most suspects are former senior managers of Adler Real Estate, people familiar with the investigation told the FT. Adler Group said in a press statement that the investigations were not directed against any board members of Adler Group.
Ben Irle, Caner’s Berlin-based lawyer, confirmed that his client’s premises in Monaco and London were raided.
Caner told the FT he was “happy” about the formal investigation because he was finally “aware what the accusations are”, adding that he was “absolutely relaxed and I am fully co-operating”.
Hinting at a former court case over alleged fraud and money laundering in Austria, in which he was acquitted, he stressed that he was “previously wrongly accused and won all cases”.
Adler Group said: “The investigations are taking place against the background of business transactions . . . in 2019, which extend into 2020.”
It added that it was fully co-operating with law enforcement authorities but declined to comment further. Aggregate did not immediately respond to a request for comment.
One of the transactions that has come into the prosecutors’ crosshairs is the sale of a property project in Düsseldorf in 2019, known as the Gerresheim deal, people briefed on the matter told the FT.
According to BaFin, it was booked at roughly double its fair valuation, inflating Adler Real Estate’s accounts by up to €233mn. The counterpart in the transaction was one of Caner’s close relatives.
Adler Real Estate is rejecting the BaFin criticism over the Gerresheim transaction and other issues, the watchdog said. The company is taking legal steps against the regulator’s finding.
Besides suspected accounting and market manipulation, prosecutors also take issue with other property sales as well as the Gerresheim deal, which they fear have inflated prices and improved loan-to-value ratios.
A forensic audit by KPMG launched after the Viceroy allegations also found that Caner was paid €12.6mn for undocumented “advisory services” in two M&A transactions, while Adler Real Estate also bought some of Aggregate’s bonds in an undisclosed transaction.
