Without the Libor scandal, Stefan Simon’s career switch from law to banking is unlikely to have happened.
Until three years ago, Mr Simon was a successful German corporate lawyer working in the sleepy Rhineland town of Bonn and teaching law at the University of Cologne. Since then, after dabbling in film production and acting, he has risen rapidly to become one of the most influential figures at Deutsche Bank, Germany’s largest lender and one of the world’s most troubled leading banks.
In 2016, Qatar’s al-Thani royal family and Deutsche’s largest investor, suggested that Mr Simon should join the lender as a supervisory board member. Next month, the lawyer will swap that non-executive job for a top management role at Deutsche.
Mr Simon’s latest career move is a rare step in corporate Germany and raised eyebrows among corporate governance experts.
Alexandra Niessen-Ruenzi, professor of corporate governance at Mannheim University, called it “problematic” and said it was at odds with the basic principles of Germany’s two-tier board system.
The appointment is part of a wider management reshuffle alongside a drastic restructuring of Deutsche aimed at shedding 18,000 jobs and a fifth of its balance sheet.
Mr Simon, a Zurich resident, will be in charge of legal and regulatory affairs — a pivotal job that paid his predecessor Sylvie Matherat €4.5m last year, compared with the €487,500 he received as a supervisory board member. His role, making him one of the nine members of the executive board, will be pivotal for a lender with a reputation battered by misconduct and shortfalls in compliance and anti-money laundering.
Deutsche is being investigated over its role in processing €160bn of potentially suspicious transactions for Danske Bank’s Estonian unit and US regulators are probing its handling of allegedly suspect payments for President Donald Trump.
Ironically, it was one of the worst misconduct cases that opened the door to Deutsche for Mr Simon: the Libor interest rate rigging scandal that has so far cost the bank €3.8bn in fines and settlements, plus legal fees.
Five years ago, as a partner at Germany’s prestigious law firm Flick Gocke Schaumburg, Mr Simon was commissioned by Deutsche to give advice and support to its employees who were being questioned by regulators over the Libor scandal.
Recommended John Gapper Deutsche’s bankers were alienated from their jobs Among the bankers he supported was Michele Faissola, the lender’s erstwhile global head of rates.
Mr Faissola left Deutsche after John Cryan took over as the bank’s chief executive in 2015 with no love lost between the two.The controversial investment banking veteran was later cleared by German regulators of any wrongdoing on Libor.
Stefan Simon is still embroiled in a Milan lawsuit over allegations of falsifying the accounts of troubled Italian lender Monte dei Paschi di Siena between 2008 and 2012, when it was a client of Deutsche’s.
In May, the Italian prosecutor called for a jail term for Mr Faissola and others allegedly involved. Mr Faissola denies any wrongdoing.
During the Libor questioning, Mr Faissola was impressed by Mr Simon’s deep legal expertise as well as his independent mind, said a person familiar with the events. In an odd twist, Mr Faissola then became an adviser to Qatar’s royal family, who own 6.1 per cent of the bank.
When a seat on Deutsche’s supervisory board became vacant in 2016, Mr Faissola recommended Mr Simon to Qatar, and the rest is history.
Inside Deutsche, some people were initially alarmed about the reputation risks.
Mr Simon was embroiled in an acrimonious spat with a former client who accused him publicly of attempted fraud, attempted embezzlement and violation of fiduciary duties.
Mr Simon has denied the allegations. A spokeswoman for Flick Gocke Schaumburg said prosecutors did not see any case for a criminal investigation. Moreover, a court in Stuttgart declined to accept the civil lawsuits filed by the disgruntled former client.
FGS also commissioned an external investigation into the matter. According to Mr Simon, who answered questions for this article via a spokesman, the internal probe did not find any evidence of misconduct.
Both sides said his subsequent departure from the law firm was “on highly amicable terms”.
After leaving FGS, Mr Simon spent time on one of his favourite pastimes: acting.
Two years ago he co-produced and acted in Dirty Bomb, an award-winning short movie that describes the true story of how, in 1944, Jewish slave labourers in a German concentration camp sabotaged the construction of V2 rockets.
Stefan Simon plays a side role as “Heinrich”, a German concentration camp commander, in the short movie “Dirty Bomb”
In the film, Mr Simon plays sadist SS commandant Heinrich.
“This character for me personally places a lot of challenges because I am German . . . so obviously that causes a lot of questions also for the actor,” he said in a making-of clip available on the film’s website.
He explained that it was not easy for him to decide “how to portray this character . . . because of the bad and evil nature of himself and of his way of running the concentration camp and the V2 rocket facility”.
A spokesman for Mr Simon said it was “a matter of heart” for him to reflect on the cruelty of German history and Nazi crimes and to reach out to Israel.
“Hence the well-known Israeli actor Ido Samuel is the main act, playing a former student of famous German scientist Wernher von Braun.”
His spokesman said that Mr Simon — who also acted in the 2018 Sci-Fi movie Birr — will halt his career as an actor while on Deutsche’s management board.
He trained as an actor at the Santa Monica-based performing arts school Baron Brown Studios and the Lee Strasberg Institute in New York.
The possibility to take up a seat on the board that one was previously supposed to supervise appears paradoxical Alexandra Niessen-Ruenzi, Mannheim University Christian Sewing, Deutsche’s CEO, had the idea to appoint Mr Simon to the executive board, according a person directly involved in the process.
The bank’s boss was under intense pressure from regulators and investors to get rid of Ms Matherat.
The former French central bank official, who joined Deutsche five years ago, has overseen a number of shortfalls in compliance and anti-money laundering controls.
“Sylvie had to be replaced,” said one senior Deutsche insider. Since joining the supervisory board in 2016, Mr Simon has impressed people at the bank.
“He did a really good job,” a union representative said, praising his active, non-partial engagement.
The Qataris say they acquired their stake in Deutsche partly to bolster a non-American investment bank, according to people familiar with the matter.
Mr Simon, however, was an early supporter of a radical retrenchment of the chronically struggling division.
“Had I not known the press reports, I would have never guessed he was endorsed by the Qataris,” said the union representative.
For some, Mr Simon’s appointment nonetheless raises questions. “Mr Simon must not act as a management watchdog and direct reporting line to Qatar,” said Jan Bayer, a Frankfurt-based lawyer and longtime Deutsche critic, warning he would “otherwise risk running afoul of German laws”.
Executives in Germany are legally obliged to act on behalf of the entire company and must not take orders from the chairman or shareholders. Mr Simon and Deutsche dismiss such concerns. His spokesman stressed that “neither before nor since [a 2016 trip to Qatar], has he had any business or private links with Qatar or its royal family”.
The spokesperson also said that apart from the Deutsche-commissioned advice during the Libor probes, Mr Simon has never done any work for Mr Faissola.
Deutsche said the Qataris were not consulted ahead of the decision and were informed via the press release. The al-Thani family did not reply to an FT inquiry. Mr Faissola declined to comment.
From a corporate governance perspective, Mr Simon’s transition from non-executive supervisory board member to senior executive is “out of the ordinary”, said Vanda Heinen, corporate governance analyst at German asset manager Union.
Mr Cryan made a similar move in 2015, but changes from an executive role to the supervisory board are more common.
For those, the law stipulates a two-year cooling-off period to avoid conflicts of interest. For Mr Simon’s move, no such rules exist. Some governance experts such as Ms Heinen consider them unnecessary owing to there being little, if any, conflict of interest.
However, Mannheim-based professor Ms Niessen-Ruenzi said Mr Simon’s move flew in the face of the basic idea of a two-tier board — managerial oversight by an independent committee.
“The possibility to take up a seat on the board that one was previously supposed to supervise appears paradoxical,” said Ms Niessen-Ruenzi, warning that non-executives may have an incentive to be soft on executives to avoid upsetting potential future managerial colleagues.
Hence moves like Mr Simon’s were at least as fraught with problems as changes in the other direction. Deutsche takes a different view — it hailed the appointment as a “commitment to good corporate governance”.