Lighting Industry, News

The €45m hole in Hess’s profits

Over the six-year period from 2007-2012, Hess repeatedly overstated its profits by millions of euro, according to the report, culminating in a discrepancy of more than €20 million in the three-month period leading up to the firm’s flotation on the Frankfurt Stock Exchange last year.

An investigation carried out on behalf of the insolvency administrator Volker Grub alleges that former directors Christoph Hess and Peter Ziegler – who were both sacked earlier this year – had brought Hess’s shares on to the stock market on the basis of false accounts. Shortly after the sacking of the pair, Hess filed for insolvency, and has since been bought by the Nordeon Group.

State prosecutors are now conducting ‘extensive’ criminal investigations into the activities of the two sacked directors, together with 20 other people, on suspicion of giving false financial statements and misleading two banks about the financial circumstances of the company and the disposition of loaned funds, which allegedly resulted in losses of €4.5 million.

Investigators are also looking into suspicions that €1.1 million of company funds was misappropriated to buy land and shares, and that figures in the prospectus for Hess’s stock market flotation were exaggerated, allegedly resulting in a €3.6 million loss to a Dutch financial services firm.

One of the two directors is also alleged to have made various dishonest expense claims, for costs including flights and fees to contractors and cleaners.

In an interview with the Südkurier newspaper earlier this year, Volker Grub alleged that the directors had created a ‘shadow world’ involving a network of dozens of fake companies conducting bogus deals that obscured the firm’s real losses. He described the case as being like something from a detective story.

Hess and Ziegler are already facing claims for €2.8 million in damages. Claims are also being made against Jürgen Hess, chairman of the company’s supervisory board, and against an auditor and a law firm that assisted Hess with its flotation.

More than 100 jobs were lost at Hess following its insolvency. It has now been rescued by the Nordeon Group, and continues to produce luminaires under the Hess brand.


Photo of Christoph Hess by Christoph Meinschaefer