The head of Morgan Stanley's German unit has offered to step down following an uproar over emails he reportedly exchanged with a regional politician, and the bank has not yet decided whether to accept his resignation, according to two people familiar with the matter.
The departure of Dirk Notheis would be a blow for the US investment bank, which had come to rely heavily on him to deliver lucrative advisory roles in mergers and acquisitions, known as mandates. The 44-year-old Notheis is one of Germany's best-connected dealmakers with close ties to Berlin, a fact that rivals say has helped Morgan Stanley snare mandates involving companies that are partially state-owned.
Emails published in the German newspapers Frankfurter Allgemeine Zeitung and Handelsblatt in the past week suggest Notheis gave strategic advice on moves by politicians in a way that has drawn sharp public criticism. The emails were not independently verified by Reuters.
In some of the emails, he appears to ask to keep German Chancellor Angela Merkel - whom he refers to as Mutti, German for "mom" - out of the loop until just before a controversial deal to nationalise an energy utility was completed in 2010. Morgan Stanley declined to comment.
The correspondence highlights the delicate and often cosy nature of relationships among senior bankers and politicians negotiating multibillion-euro deals involving public-sector assets. Earlier this year, senior J.P. Morgan Chase & Co banker Ian Hannam resigned following a high-profile clash with Britain's financial services watchdog over the level of disclosure during multibillion-euro deals.
Notheis got into hot water over his emails to Stefan Mappus, then the premier of Baden-Wuerttemberg, when the southern German state was seeking to buy a 45 percent stake in local utility provider EnBW from French utility EDF. Notheis and Mappus are members of the Christian Democratic Union (CDU), the same political party as Angela Merkel.
Baden-Wuerttemberg eventually bought the EnBW stake in December 2010 for about 4.7 billion euros. But Baden-Wuerttemberg has since launched a probe into the deal and sued EDF, arguing they overpaid for the stake to the tune of 2 billion euros. Morgan Stanley provided the emails to Baden-Wuerttemberg, as part of a probe into the deal.
Since the correspondence was published, Notheis has become a target of criticism among some Berlin politicians. Frank Schaeffler, the parliamentary finance spokesman for Germany's Free Democratic Party said, "This is scandalous conduct by an investment bank. The morals and ethics of the entire industry are being damaged with actions like these."
Morgan Stanley has won some big mandates from Berlin under Notheis, who at one point took a break from banking to help raise campaign finance for Merkel's CDU party. So far this year, Morgan Stanley ranks second in Europe, behind Goldman Sachs in terms of the value of merger-and-acquisitions deals in which it was involved, according to Thomson Reuters data. In Germany, the New York investment bank ranks second behind Deutsche Bank and ahead of Goldman.
Morgan Stanley was co-bookrunner for Commerzbank's 11 billion euro rights issue, adviser to Deutsche Telekom's aborted $39 billion sale of T-Mobile USA to AT&T and bookrunner for Deutsche Post DHL on a 750 million-euro exchangeable bond for state-controlled development bank KFW. Germany retains a 15 percent equity stake in Deutsche Telekom, a 25 percent stake in Commerzbank and a 30.5 percent stake in Deutsche Post.
Emails from 2010 appear to show Notheis giving advice to Mappus about how to limit time for political debate about re-nationalising EnBW. "Call a confidential meeting at the state ministry with three politicians but without the supervisory board chairman, initially without giving a reason," said one of Notheis' emails to Mappus, as published in German daily Handelsblatt.
Merkel's assistance will be needed to help persuade the French to sell, and Mappus should meet with French premier Nicolas Sarkozy in person, Notheis said, adding, "Ask Mutti if she can arrange that," according to the published emails. Because nationalisation of assets is a tough sell among free-market politicians, Notheis advised Mappus to find external endorsement, according to the emails.
"Ideally find a renowned economist who thinks its a good thing. It should be somebody who owes you a favour," according to the emails published in Handelsblatt. He also advised Mappus not to get a second opinion. "You're going to get calls from numerous bankers. They will urge you to give them a mandate. You have to turn all of them down and tell them you are all set for advisers. And please pull this off. Otherwise it just causes sand in the gearbox and I really can't deal with that right now." Notheis, who has been head of Morgan Stanley's German and Austrian operations, was named chief in February 2009, when he was 40 years old.
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