German prosecutors probe bankers over brothel financing

Prosecutors in Cologne have opened an investigation into three employees of Volksbank Koeln Bonn, a regional cooperative bank, over the lender's financing of one of Europe's largest brothels. The probe centers on a €5-million loan issued in 2021 to a Chinese investor for the purchase of the 12-storey property housing the Pascha brothel, which had gone insolvent during COVID-19 lockdowns.

The investigation targets a bank board member, identified by his lawyer as Juergen Neutgens, and two other employees. A lawyer for Neutgens said his client denies any wrongdoing and has not received any payments. The identities of the other two employees have not been confirmed.

Prosecutors are examining allegations including bribery, bribes in business dealings, and breach of trust. The scope of the criminal probe is broader than the bank's own internal review, which was launched in July after German media reports about the loan. The bank has said it operates on the presumption of innocence for the individuals and does not consider itself a target.

Germany's financial regulator, BaFin, has also questioned the bank over the financing, according to a person with direct knowledge of the matter. The regulator's focus is reportedly on a potential kickback to the board member, though no details on who received it or why have been established.

The bank has placed the board member on leave while its independent investigation, conducted by an unidentified law firm, is underway. The probe is examining whether the board member "possibly personally benefited" from the transaction.

Prostitution is legal in Germany. The Chinese investor named in company filings, Hu Jing, did not respond to requests for comment. A lawyer for Hu said there were no indications the property's owner or operator was under investigation. The brothel's manager said his company rents the premises and had no involvement in the loan.