Meet Deutsche Bank’s least-popular board member

A lawyer asks a lot of questions and clashes with the chairman “The company needs to return to calmer waters”

Georg Thoma, a lawyer, and Paul Achleitner, a banker, worked together for more than two decades modernizing corporate Germany. In 2013, when Achleitner needed a specialist to solve the multibillion-dollar legal headaches at Deutsche Bank, where he was chairman, he proposed his friend join the supervisory board.

But now Thoma has turned on him. The conflict has burst into the open, deepening the troubles at Germany’s dominant financial institution. Thoma’s intensive efforts to investigate Achleitner and Deutsche Bank executives have left him isolated, according to at least two board members who’ve spoken out against him in public. The bank’s 20-person supervisory board, scheduled to meet on April 27 and 28, was expected to discuss Thoma, according to a person familiar with the matter. The lawyer may be pressured to step down from the board.

Thoma’s probes have been fraying his relationships on the board at least since 2014. Last year he sought coChief Executive Officer John Cryan’s approval for an investigation into Chairman Achleitner’s role in the bank’s response to a U.K. investigation of the company’s London interbank offered rate-setting practices, according to people familiar with the matter. The bank agreed in 2015 to pay a record $2.5 billion in fines to U.S. and U.K. authorities to settle charges that several employees helped rig Libor, used as a benchmark for loans around the world. A Deutsche Bank spokesman declined to comment on behalf of the institution and Achleitner. Thoma didn’t respond to requests for comment.

“The current infighting is simply a reflection of the frustration current board members are feeling as they attempt to clean up the mess caused by earlier bank transgressions,” says Mark Williams, a lecturer at Boston University and author of Uncontrolled Risk, a book on the rise and fall of Lehman Brothers. “The extent of open infighting is not healthy and points to a bank that still has not fixed its corporate governance issues.”

Cryan was appointed CO-CEO last year to turn around a bank beset with regulatory and business issues. Its shares are down more than 4o percent in the past 12 months. In addition to legal costs, a trading slump has eroded revenue, compounding concerns that it can’t earn enough to fund the overhaul. The bank paid or set aside more than €12 billion ($13.6 billion) to cover fines and lawsuits from 2012 through 2015, helping wipe out profits in the period.

Thoma’s conflict with the board became more public on April 24. Deputy Chairman Alfred Herling criticized him in the newspaper Frankfurter Allgemeine Sonntagszeitung, saying he was going too far and spending too much in probing potential wrongdoing. The paper cited another board member saying that while the bank needed to be diligent working through legal issues, it had to be able to move on. The costs for Thoma’s investigations are “no longer proportionate,” Herling told the paper. Reached the following day, he confirmed the comments attributed to him but said he had nothing to add.

Michael Hünseler, a money manager at Assenagon Asset Management, which holds some of the bank’s bonds, says the legal issues remain a concern for investors. “We’d prefer Deutsche’s management to focus on getting the bank back in shape and not being distracted

“The bank has to focus on the future and its success, so it is a legitimate question whether you can delve too deeply.” —— Analyst Michael Seufert

by internal disputes,” he says.

Achleitner tapped Thoma as part of an overhaul to bring in more legal and finance specialists. The lawyer, who’s with the firm Shearman & Sterling, has been leading a board committee that monitors and analyzes legal risks. Achleitner told colleagues at the time Thoma joined the board that his experience would be a boon, because post-financial-crisis scandals were just beginning to hit European banks, according to a person familiar with the matter.

There was a personal connection, too. The friendship between Achleitner and Thoma went back decades. The two men worked on the privatization of the eastern German chemicals industry after the fall of communism. When Achleitner was at Allianz, Thoma advised the insurer on its purchase of Dresdner Bank and on the subsequent sale of the lender to Commerzbank in 2008.

“Georg Thoma is without a doubt one of the distinguished lawyers in Germany,” Achleitner’s wife, AnnKristin, said in a speech in 2005.

With Deutsche Bank embroiled with regulators and prosecutors in the U.S. and the U.K., Thoma has expressed increasing concern about his own personal liability and that of his board colleagues, says one person familiar with the situation.

Achleitner and Thoma have clashed in front of other supervisory board members, say people who’ve seen them squabble. The conflicts erupted over big strategic issues as well as smaller ones, one says. Thoma’s internal probes may have incurred €14 million in legal costs for 2014 alone, says one of the people familiar with them.

Analyst Dieter Hein, at Fairesearch-Alphavalue near Frankfurt, says Thoma is “doing his job.” Hein’s firm has a sell recommendation on Deutsche Bank’s shares. “The company needs to return to calmer waters, and to do that, the supervisory board needs to determine what went wrong,” he says.

Michael Seufert, an analyst at Norddeutsche Landesbank in Hanover, says the issue isn’t that clear-cut. “The bank has to focus on the future and its success, so it is a legitimate question whether you can delve too deeply,” says Seufert, who has a hold rating on the shares. “Deutsche Bank and the wider industry have changed so much over the last few years that our understanding of what is inappropriate today doesn’t necessarily reflect the practices of the past.”

The bottom line Deutsche Bank brought an attorney onto its supervisory board to help manage legal risk. He hasn’t been popular.