How P&R Containers shifted from shipping to the more profitable business of simply ripping people off.
By Giulia Morpurgo and Laura Malsch
September 29, 2024 at 9:01 PM PDT
The Munich suburb of Grünwald is home to some of the richest people in Germany—old money sprinkled with a few corporate chieftains and sports stars. The place oozes respectability and discretion, with residents who appreciate neighbors who don’t ask too many questions.
It was a perfect home for P&R Containers. The company—ostensibly in the shipping business—occupies a low-slung building with oversize windows on a winding street of doctors’ offices, insurance agents and real estate brokers. It’s one of the smallest structures in the area, and behind the glass doors there’s little ostentation, just plain rooms with gray carpets and white walls.
That appearance of anonymity and humility allowed P&R to carry out one of Germany’s biggest-ever scams. The company presented itself as a broker of shipping containers—those 20- and 40-foot steel boxes stacked up on ships or strapped atop trucks and trains that carry everything from socks to sofas, ramen to refrigerators. But over the years, P&R slowly shifted away from containers to the more profitable business of simply ripping people off.
At its peak in 2018, P&R claimed to control 1.6 million containers, which it sold to retail customers and then leased on their behalf to shipping companies. In reality it owned only about 600,000 of them. The rest were fiction—which would soon shock the company’s tens of thousands of investors.
P&R’s affectation of modesty attracted people who liked its discreet profile and cared more about security and regular returns than high yields. Its investors, typically retirees getting the bulk of their financial advice from small-town brokers and advisers, frequently put a big chunk of their savings into the containers.
At times, P&R’s frugality approached absurdity. The company charged for merch such as branded notepads and pens that most might hand out as freebies to clients, insurance broker Manfred Röll recalls. But Röll, who recommended P&R to clients and invested about €50,000 ($56,000) of his own in the scheme, interpreted this quirk as a sign of management’s vigilance with investors’ money. “I thought, ultimately, it would all benefit the customers and payouts,” he says.
The trust was so strong that few were suspicious when payments to owners were a little delayed in early 2017, and they were only mildly puzzled when money stopped showing up a few months later. But in March 2018, unable to sustain a Ponzi scheme that had put the company more than €3 billion in the hole, P&R filed for insolvency. “There were no flashy sports cars, no yachts, no private planes, no elaborate parties and, as far as we know, no drugs,” says Wolfgang Schirp, a lawyer in Munich working with hundreds of people who are trying to get their money back. “This contributed to the perception that we were dealing with thoroughly reliable, staid businesspeople. Nothing aroused suspicion.”
Six years later, the fraud is still unraveling. An insolvency administrator is overseeing what’s left of the container fleet to ensure P&R’s 54,000 creditors recoup as much as possible. The burned investors formed dedicated Facebook groups to commiserate and organize carpools to a pair of 2018 meetings with the administrator, held at the 15,500-seat Olympic Hall in Munich. More than 90% of the victims were German, with the bulk of the others coming from Austria and Switzerland. Most had invested in P&R for years, if not decades. Many were retired: At the time of the insolvency filing, more than a third were over 70.
P&R was founded in 1975 by an entrepreneur named Heinz Roth, who maintained tight control. He retired in 2007 but took over again in 2016, according to prosecutors in Munich. Roth kept a low profile, and when the scandal broke, few people in the close-knit Munich financial community had ever heard of him. The daily Süddeutsche Zeitung headlined a story about Roth “The Search for the Phantom.”
P&R sold investors individual containers—€1,415 apiece in 2017, according to a prospectus from that year—which it then leased to shipping companies. The investors received rent payments (in 2017, 11% of the purchase price annually); after five years, P&R promised to repurchase the containers for 65% of their original value. Over that period an investor could expect a total return of about 20%.
For years, investors say, the payments landed on time, and P&R met all the other terms of the contracts, prompting many to plow more money into the scheme. But around 2007 something at headquarters changed. Accounts dating to that period show a growing gap between the number of containers P&R claimed to own and those it actually had on its books.
In effect the company didn’t need to buy new containers to keep the cash rolling in: By 2010 the gap between those it pretended to own and those it actually owned had swelled to 600,000, growing to 1 million at the time of the insolvency filing, according to the insolvency administrator. That meant P&R had to pay ever greater sums of money from whatever containers it controlled. In classic Ponzi fashion, an increasing share of any new investments was shoveled right back out the door to pay off existing investors.
Virtually all containers are assigned a serial number by the Bureau of International Containers, an industry group that maintains a global registry of ownership, making them easy to track online. But while P&R provided investors with serial numbers for the containers they “owned” on request, more than 90% never bothered to ask. The small minority who did would get a certificate with the number of one of P&R’s containers, though creditors say it never actually corresponded to one truly owned by a particular individual.
Making the situation even murkier, the Grünwald operation had no containers on its balance sheet. Instead they were managed by a subsidiary in Switzerland, according to reports by the administrator. With money flowing from one country to the other, it wasn’t hard to hide discrepancies. “There was a business, but a reduced one,” says Peter Mattil, a Munich lawyer who represents more than 10,000 P&R investors and serves on a committee representing creditors.
And the administrator says there was little supervision: Audits of P&R’s German operations were carried out by Werner Wagner-Gruber, a tiny firm in Regensburg, a city on the Danube about 90 minutes east of Munich by train. Some creditors have sued the auditor and his insurers, though attorneys representing the plaintiffs say they’re unlikely to recover more than a tiny fraction of what they lost. Wagner-Gruber’s attorney declined to comment.
Some P&R investors fault Germany’s Federal Financial Supervisory Authority (known as BaFin, after its name in German), for insufficient oversight. The agency greenlighted a P&R prospectus just a few months before the company fell into insolvency. But BaFin says such an approval isn’t linked to an issuer’s creditworthiness, and German courts have dismissed all efforts to claim damages from the agency.
That distinction angers P&R investor Martin von Hören, who understands it’s not BaFin’s job to audit financial statements but questions the logic of the agency’s mandate. “Regular investors have a different expectation of what it means if a financial product gets BaFin’s sign-off,” says von Hören, who had €200,000 parked with P&R when it collapsed.
After the insolvency filing, Roth resisted ceding control, particularly of the operational core of the company, in Switzerland. But Munich prosecutors in 2019 charged him on 414 counts of commercial fraud and 12 counts of tax evasion. They discontinued the case a few months later because Roth fell ill. He died that December at 77, but creditors are seeking assets from his estate.
Michael Jaffé, the administrator, has distributed €544 million to creditors—equivalent to 17.5 cents for every euro they’re owed. Much of P&R’s property has been sold, but the company remains a force in the business, with almost 350,000 containers as of September 2023. “Every hundredth container that travels around the world generates proceeds for creditors,” Jaffé wrote in a November report.
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Some disaffected investors have simply given up, selling their claims against P&R to firms that specialize in distressed debt. London-based Fidera Ltd., which five years ago started offering 14 cents on the euro, has increased that to as much as 25 cents. Today it’s the biggest creditor, with “hundreds of millions” in claims, according to a person familiar with the matter who asked not to be named discussing private information.
Jaffé in November said redistributing a quarter of face value is “quite conceivable,” but a precise estimate is tough to conjure, as any valuation will depend on volatile freight rates. The pandemic and the war in Ukraine pushed up shipping costs, but they tumbled in early 2023 as economic growth slowed and new shipping capacity came online, then shot back up this year on fears of a wider conflict in the Middle East and attacks on ships in the Red Sea.
On a warm weekday morning, a half-dozen cars are parked outside the P&R office in Grünwald; it’s business as usual for the staff, who now effectively work for the administrator, overseeing the remaining containers and fielding inquiries from creditors. Those still on the payroll say they were unaware of the fraud at the top—an assertion the administrators have accepted. Many, in fact, were P&R investors themselves.
The insolvency process is likely to last several more years, Jaffé says. There is, though, a natural limit, as the normal life of a container is 12 to 15 years—and P&R in 2017 said its fleet had an average age of more than eight years. So before long, the rest of P&R’s containers will be retired, investors will have received any final payouts, the Grünwald office will shut its doors, and the town will revert to its long tradition of keeping its secrets under wraps.
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