The European Lawyer

Germany Corporate/Commercial

31 Jul 2010

International Fraud and Asset Tracing - Germany

Editors: Gleiss Lutz - Stefan Rützel and Florian Wettner

1. MANAGING THE INTERNAL INVESTIGATION
A successful internal investigation has to comply with legal requirements to ensure that the company is not exposed to any liability and that the obtained information may be used in later proceedings. The German statutory framework for the instruments to obtain the information, ie the retrieval of documents and the questioning of employees, is outlined in the following. Within this statutory framework, how to manage an internal investigation might also be influenced by the company’s internal guidelines setting out the policies and procedures for conducting an internal investigation.
The applicable German statutory law, however, is generally deemed to guarantee minimum rights for the affected employees. The statutory provisions may therefore only be altered by internal rules to the benefit of the employees or with their consent.

1.1 Retrieval of documents
Before and during the investigation, it is of crucial importance to secure and retrieve hard copies as well as electronic documents.

Hard copy documents
As part of the investigation it may be necessary to search employees’ offices, particularly their desks. Such desks may contain personal as well as business-related items.
Business-related items such as folders, files and other documentation may be examined by the employer, without any restrictions. The employee who compiled and created the documentation has no right to refuse to surrender it. It does not matter whether the examination is conducted by other employees, eg in-house counsel, or external advisors on behalf of the employer.
Personal items and documents, however, must not normally be examined without the employee’s consent. Such personal documents are subject to the employee’s right to protection of privacy (Schutz der Privatssphäre) and, if applicable, to the right to secrecy of correspondence (Briefgeheimnis), both of which are guaranteed by the German constitution. Only if the employee whose personal items are to be examined is strongly suspected of a criminal offence, may the examination of such items be allowed.
Therefore, the employer usually has to make arrangements to ensure that private documents are not examined, eg by sorting out private documents in cooperation with the employee. Only where business-related and personal documents cannot be physically separated may the employer inspect them to see whether they contain business-related or private content. An inspection of this kind must be discontinued immediately, however, once the indications are that the document is private.

Electronic documents
With regard to the examination of electronic documents, one must again make a distinction between business-related and private documents.

Business-related documents
The examination of business-related electronic documents and emails is in principle permitted. Only if these documents contain personal data, ie any information concerning the circumstances of an identified or identifiable individual, is their use by the employer subject to the provisions of the German Data Protection Act (Bundesdatenschutzgesetz, BDSG).
According to the latter, the processing (eg copying, reading, transmitting) of electronic documents containing personal data is permitted if this is in accordance with the purposes of the employment contract or if it is necessary to safeguard justified interests of the employer and the employee has no overriding legitimate interest in his data being excluded from processing. Therefore, in case of suspicion of unlawful conduct within the company there are normally no obstacles to the copying and reading of electronic documents under data protection law.
However, under data protection law special problems may arise with regard to the transfer of electronic documents containing personal data to supervisory agencies, eg the United States Security and Exchange Commission (SEC), or to the company’s branches and advisors abroad. Firstly, in such cases the risk of an employee’s criminal conduct being revealed, and thus of him being criminally prosecuted, must be considered as conflicting with the company’s justified interests and could legally preclude the transfer. Secondly, a transfer of electronic documents containing personal data to a recipient outside the EU is only permitted if the recipient establishes a data protection standard adequate to the EU standard. The US data protection standard, for example, is generally not deemed to be adequate.

Personal documents
As a general principle the processing of personal electronic documents and emails is not permitted. In this respect, the same standards apply as for personal hard copy documents.
However, there are two cases where the processing of electronic documents related to specific employees is permitted: The first is where employees are not allowed to use the computer and/or the email account for private purposes. In such cases, the employer may assume that the employees are acting in compliance with their duties and, thus, he may consider all documents or emails stored on their computers as business-related. Secondly, the processing of personal electronic data is permitted if the employee has given his consent. Such consent may be given expressly in the employment contract, by consenting to employment manuals containing provisions on the investigation or in separate agreements to this effect.
Furthermore, under German data protection law, it is permissible for the employer to process data, including private emails, in the course of regular data storing and data processing exercises (eg, a general backup) not directed to the data of specific employees. Thereby, data could be secured against cover-up activities by certain employees.
If the processing of personal documents is permitted at all, the limitations under data protection law (see above) may apply.

Participation of employee representatives
It may be a requirement that employee representatives, such as a works council (Betriebsrat), become involved in the retrieval of documents by the employer.
Ordinarily, the employer will at least have to inform the works council about the examination of documents at some stage. The works council has a right to information (Informationsrecht) in any case where its tasks could possibly be affected. One of the tasks of the works council is to ensure the proper application of statutory law applying to the benefit of employees. Therefore, it might have the right to monitor the retrieval of documents, particularly to ensure compliance with data protection law. In this respect, the works council may express concerns, but does not have any right to prevent the employer from examining documents.
Furthermore, the works council could have a right of co-determination (Mitbestimmungsrecht) where the investigation requires the examination of private electronic documents and private emails as this can reveal if and to what extent the employees are complying with the employer’s policy on the private use of computers and email accounts. In such cases, the employer has to consult with the works council about the examination of the personal documents and obtain its agreement. If no agreement can be reached, the matter is referred to a conciliation committee.
However, the works council’s right of co-determination could already be exercised in the form of an agreement with the employer (Betriebsvereinbarung) on the private use of email accounts, including their examination. In such a case, the examination has to comply with the provisions set out in the agreement and the works council does not have to be asked for its consent again once an internal investigation is contemplated.

1.2 Obtaining oral evidence from employees
An important means of investigation is the questioning of employees by way of individual interviews or questionnaires.

Employees’ obligations to disclose information
In principle, an employer has the right to have employees questioned by other employees or external advisors with regard to business-related matters and about possible criminal activity. Whether and to what extent an employee has the right to refuse to answer questions, depends on the subject matter of the questions.
The employee is obliged to fully and frankly answer questions that directly concern the tasks assigned to him on the basis of his employment contract. He may not refuse to answer because he fears negative consequences or self-incrimination. Rather, German case law stresses that otherwise the employer would have no effective means of uncovering unlawful failure on the part of employees to fulfil their contracts. Nor may employees object on the grounds that by answering they would implicate colleagues.
If the subject matter of the question does not directly concern the employee’s contractual tasks, he is obliged to answer if the employer’s interests prevail over his own. Therefore, the employee will generally be said to have a right to refuse to answer if he is incriminating himself. The issue of whether he has a right of refusal because he would implicate a colleague is assessed differently in German case law and depends on the circumstances of the individual case.
Special problems arise where the interviews are conducted by external lawyers who are acting not only in the interest of the company, but also of a (foreign) supervisory agency with which the company might be urged to collaborate, eg with the SEC. In such cases, an employee may run a higher risk of potential criminal prosecution when revealing unlawful conduct than if he talks to lawyers who are acting only in the interest of the company. Whether and to what extent the employee has a right to refuse to answer questions in such cases, eg even just because the possible consequences appear unclear, has not been tested in court yet.

Participation of employee representatives and right to legal representation
Generally, the works council has to be informed about the questioning of employees. Its right of co-determination may be triggered if the questions are put in the form of a questionnaire, or if the subject of (some) questions will concern not only the employee’s contractual tasks but also his conduct in the company. However, an employee is never entitled to have a member of the works council present at the interview.
Furthermore, generally speaking, a company is also not required to inform the employee of his rights or provide him with a lawyer. Thus, the employee has no right to refuse to answer solely because there is no criminal lawyer present. However, by way of an exception, on the basis of its collateral duty of care vis-à-vis its employees, the company may be required to accept the presence of an attorney at an interview if it intends to question expressly the employee about criminal conduct. Regardless of legal obligation, however, the company may be required to accept a lawyer for practical reasons, eg if the employee refuses to cooperate otherwise. In view of the timing of internal investigations, the company usually cannot wait  for a court decision to enforce its right to obtain information.

Use of oral information and interview notes as evidence
In civil proceedings, an employee may refuse to answer questions if replying would subject him to the risk of prosecution for a criminal or administrative offence or would result in a direct pecuniary loss. Therefore, an employee cannot be forced to repeat in court statements he made during the interview. However, the possible procedural right to refuse to give evidence in court does not preclude the use of the information in later proceedings as the employee’s statements were given in private interviews and thus outside state proceedings. That applies similarly to criminal investigations and proceedings (see below).
Another matter to be considered is the manner in which the information obtained in an interview may be introduced into the civil proceedings as evidence. The interview notes themselves can be used in the proceedings. However, they are not considered as witness testimony (Zeugenbeweis) but as documentary evidence (Urkundenbeweis). According to German procedural law, witness testimony is only oral information obtained by the court. The interview notes, being a private document (Privaturkunde), can only prove that the declarations made in them are those of their authors, ie of the persons who signed the notes. Thus, if the interviewed employee signed the interview notes, they provide evidence that the employee made the statements documented in them. As to the correctness of the statements, the court may then draw whatever conclusions it deems to be justified by taking into account the entire substance of the hearings and the result of any other evidence taken.
Therefore, in proceedings against third parties the employer should call the employee himself as a witness, if he supports the employer’s position, in order to give the court the chance to assess his credibility. Also the interviewers themselves can be put forward to testify on the manner and the content of the interviews.

1.3 Privilege
In conducting the investigation, a number of documents or records will be produced, either by the employees in response to requests from the in-house legal team or the external lawyers, or by those lawyers themselves. The protection of such documentation against disclosure in civil or criminal proceedings by the German ‘legal privilege’ is outlined in the following.
In civil litigation, documents and records which have been produced in response to requests from an attorney admitted in Germany or by that attorney himself fall under legal privilege. It is not necessary that the notes or records contain own reflections of or legal advice by the attorney. Unless otherwise instructed by the employer as his client, the attorney is allowed to, and must, invoke privilege if asked to testify in court about the contents of the interviews and the notes. This may become relevant when a third party or an employee of the attorney’s client requests that the attorney testifies on the contents of the interview with (other) employees.
The above privilege very likely also extends to foreign lawyers not admitted in Germany, but acting in their capacity as external lawyers retained by the employer. It appears that this, however, has not been tested in the German courts yet. Whether (German) legal in-house counsel can invoke legal privilege relating to their work for the company is disputed. The majority view acknowledges such privilege if the in-house counsel’s work for the company is comparable to that of an independent outside attorney. This requires that the in-house counsel is admitted to the bar, that he is predominantly engaged in legal advice for his employer, and that his position in the hierarchy of the company grants him a certain degree of independence.
In criminal proceedings, eg against (ex-)employees, or in proceedings for administrative offences, eg also against the internally investigated company, German legal privilege applies as follows. All written communications to an attorney admitted in Germany by the person accused of a criminal or administrative offence and records that an attorney makes about communications between him and such person or about other facts he learns in his capacity as attorney may not be seized by the officials conducting an external inquiry. Thus, among others records of the attorney’s discussions with employees, ex-employees or any third party made in the course of the internal investigation can also be privileged. However, such privilege is subject to two important restrictions. Firstly, privilege ordinarily only applies if the above communications or records are in the possession of the attorney. Records in the possession of the accused may be seized unless they were made after the prosecution has been officially commenced and for the purpose of his defence of such proceedings. Secondly, the above communications or records are not protected if the attorney has acted not on behalf of the accused person but of a third party. Therefore, in criminal proceedings against an (ex-)employee accused of a criminal offence, any records, eg interview notes, made by the lawyer acting for the company could be seized by the public prosecutor.
Whether and to what extent the above privilege extends to external foreign lawyers and to legal in-house counsel acting for the employer is disputed. Thus, relevant documentation produced in the course of an internal investigation should be kept by an external lawyer.

2. DISCLOSURE FROM THIRD PARTIES
One of the fundamental principles of German civil procedural law is that each party has to obtain the evidence it needs itself. Therefore, an extensive period of pre-action disclosure by third parties (as well as by the possible defendant) as known in common law jurisdictions is not provided for by German law. German civil procedural law features other concepts to cope with the claimant’s possible deficiencies with regard to information and evidence. In addition, however, German law also provides some specific, albeit limited, instruments to obtain information from third parties prior to commencing an action.

2.1 Overview of general concepts compensating for the claimant’s lack of information
With regard to the claimant’s lack of information and evidence, German law features the following procedural concepts.
At first, it is admissible to plead certain facts as true even if the party has little evidence that they are true. It may, for example, be sufficient to state only general observations indicating certain facts, or to provide reasonable assumptions. The party may try to substantiate such allegations in more detail and to prove them in the course of the proceedings.
Secondly, in fields where the opponent typically has better knowledge of particular facts, his response to the claimant’s allegations must be more precise and must rebut the allegations in a more detailed way. Where specific information and evidence is typically not available to the claimant, but is available to the defendant, the burden of providing and proving the respective facts may even shift.
Thirdly, the defendant (as well as the claimant) is required to state all the alleged facts on which his defence is based truthfully and completely. Violations of this obligation may be a criminal offence under German law.
Against the above background, the company’s need to get information and evidence from third parties prior to commencing an action is therefore not as strong as in common law jurisdictions.

2.2 Enforcing substantive law claims for disclosure
In addition to the above concepts compensating for the company’s information deficiencies, German law also provides for specific instruments to obtain information from third parties prior to commencing an action. In this regard, disclosure may either be based on a contractual or a statutory claim against a third party:
• The company may have contractual claims for disclosure of information against own employees other than the wrongdoers.
• Irrespective of a contractual relationship, the company may be entitled to ask the possessor of an object (Sache) for an inspection of such object (section 809 German Civil Code). For this to be the case, the company must have a claim in respect of that object against its possessor or wish to obtain certainty as to whether such a claim exists. Such claim could be, for instance, a claim for recovery of company assets. In this case, the inspection has the aim of assessing whether the object actually belongs to the company. However, such right of inspection does not apply where the sole purpose of the inspection is to gather information against a person who is not (any more) in possession of the object to be inspected, eg against the employee who has stolen company assets and handed them over to a third party.
• The company may also be entitled to claim inspection of a document (Urkunde) against its possessor (section 810 German Civil Code). Unlike the above right of inspection of other objects, this right does not require that the company has a claim in respect of the document, but it is necessary that the content of the document be related to the company. A document is deemed to be related to the company if it was drawn up in its interest or if it relates to the legal relationship or negotiations between the company and another person, such as invoices, receipts, warrants of attorney, etc. Furthermore, the company must have a legal interest in inspecting the document. The company will be deemed to have such an interest if it needs to know the document and its contents to safeguard and enforce its interests in civil proceedings. However, the company has to assert certain facts supporting the assumptions to be confirmed by the inspection of the document. Finally, it should be noted that only a written communication relating to business is deemed to be a ‘document’ within the meaning of section 810 German Civil Code. Pictures, photos, films, sound recordings or in particular electronically stored information are not considered ‘documents’. A right to inspect information of this kind can only arise under the abovementioned conditions of section 809 German Civil Code.
If the third party does not comply with the above claims, they need to be enforced in a separate civil lawsuit prior to commencing an action against the wrongdoers. (In a pending lawsuit, the court may order the production of information by third parties under certain restrictions.) The above claims for inspection, however, may also be enforced by way of a preliminary injunction. This injunction can be obtained very quickly and thus may reduce the risk of the defendant destroying relevant documents or other objects.

2.3 Independent procedure for the taking of evidence
Another instrument for obtaining information from third parties prior to commencing an action albeit a very limited instrument in the context of fraud litigation is the independent procedure for the taking of evidence (selbstständiges Beweisverfahren) provided for by German civil procedure law.
Upon notion of the company, the court may order the examination of witnesses if the company demonstrates a legally acknowledged interest in the witness testimony prior to the proceedings. As witnesses are generally heard in the course of the proceedings (hearing for the taking of evidence), such an interest in the testimony prior to the proceedings is only assumed, however, where the witness is dangerously ill and may not be alive at a later hearing or where he might abscond to another country.
Electronically stored information as well as pictures, photos, films or sound recordings may also be the subject of an independent procedure for the taking of evidence. The company will be said to have a legally acknowledged interest in such examination by the court if there is a real danger that these objects may be destroyed or modified.
It should be noted that in contrast to the above objects, written hard copy documents are considered as ‘documentary evidence’ in terms of civil procedural law. Its production cannot be ordered in the course of an independent procedure for the taking of evidence.

2.4 Using disclosure proceedings abroad
If the third party lives abroad, another possible instrument for obtaining information from that party might be initiating legal proceedings for disclosure of information in the respective foreign court. However, whether such disclosure can be used to support German civil proceedings is a question of the respective foreign procedural law. German courts will generally accept such information as evidence when it was obtained in a manner which does not constitute an exclusion of evidence according to German law.

3. STEPS TO PRESERVE ASSETS/DOCUMENTS
Preserving assets and documents may be of crucial importance for the company to secure compensation from the wrongdoers and to succeed in litigation. In this respect, German civil procedural law provides for efficient instruments, particularly to preserve assets. However, German civil procedural law does not provide for compulsory measures such as searches of premises or seizures of assets for the purpose of gathering and securing evidence for civil proceedings. Therefore, it could be useful for the company to induce a criminal investigation in order to benefit from the use of such compulsory measures in the course of the criminal investigation.

3.1 Civil procedural means to preserve assets and documents
Provisional relief
German law provides for two categories of provisional relief, ie attachment (Arrest) and preliminary injunction (einstweilige Verfügung), which can also serve for the preservation of assets and documents to safeguard the interests of the company. Which of them is available depends on the nature of the claim to be secured and thus on the aim pursued by the company.

Attachment to secure a monetary claim
Prerequisites
An attachment secures a monetary claim (attachment claim, Arrestanspruch). Therefore, it is the proper remedy for the company intending to preserve the alleged wrongdoer’s assets in order to secure a possible claim for damages and compensation against the latter.
In addition to the attachment claim, the company must show a ground for attachment (Arrestgrund). A ground for attachment exists if there is reason to fear that the enforcement of a subsequently rendered judgment would otherwise be frustrated or made substantially difficult due to actions or the financial situation of the defendant. The attachment of the defendant’s assets must, therefore, be necessary to preliminarily protect the claimant’s prospects of executing a judgment rendered in the future.
Grounds for an attachment may include reasonable suspicion that the defendant is dishonestly attempting to put his assets out of the claimant’s reach or if the defendant makes or plans dispositions concerning his assets which are objectively likely to make execution in respect of these assets more difficult. A ground for attachment might also be assumed if there are reasons to believe that the defendant’s conduct qualifies as fraud or embezzlement of assets. However, mere financial difficulties of a debtor do normally not constitute grounds for attachment.
The standard of proof for the facts supporting the above attachment claim and grounds is relaxed compared to that applying in the main proceedings. The company only has to show prima facie evidence. It is sufficient that the judge holds the correctness of the alleged facts to be more likely than not. In addition, evidence in the form of sworn affidavits by the claimant himself is admissible. This possibility not only saves time but also means that evidence can be submitted which would not be admissible in the main proceedings.

Procedure
The company must file an application at the competent German court containing a motion which specifies the amount of the monetary claim and indicates that an attachment of assets is requested (dinglicher Arrest). Alternatively, the company may seek ‘personal attachment’ (persönlicher Arrest) of the wrongdoer by way of detention in order to prevent him from frustrating the execution against his assets. However, this kind of attachment is basically never applied for, due to its extremely strict prerequisites.
Depending on the circumstances, the court may notify the defendant of the application, set a deadline for a written response, and schedule an oral hearing. The court will then issue an order of attachment. However, in most cases, the court will not schedule a hearing but issue an attachment order ex parte. This allows the claimant to obtain a court order securing his claims without giving the defendant time to thwart such security. Furthermore, this procedure is very fast. Normally, it does not take more than two or three days, sometimes even only two hours, from filing the application to obtaining the court order.
Attachment orders and judgments may be enforced by garnishing claims and other rights, by attaching tangible personal property, or in case of real property, by an involuntary lien procedure. It is important to note that the company will have to execute the attachment order or judgment, respectively, within one month from service of the attachment order on the claimant or from the issue of the judgment.
Besides the abovementioned advantages, it should be noted that the company applying for an attachment also faces the risk of extensive no-fault liability. Should the attachment order or judgment be rescinded upon a protest or appeal by the company’s opponent, the company is liable on a no-fault basis for all damage which the opponent has suffered from the execution.

Preliminary injunction to secure a claim for recovery or a right of inspection
Prerequisites
A preliminary injunction secures all non-monetary claims (injunction claim, Verfügungsanspruch). It is not a general instrument to preserve assets or documents just because they might serve as evidence in civil proceedings and in order to prevent the defendant or third parties from destroying them. Rather, the company must have a special claim with respect to the assets or documents it wants to preserve by way of preliminary relief. Therefore, the preliminary injunction would be the proper remedy if the company seeks to preserve its specific assets in order to secure a claim for recovery of such assets. Furthermore, it can be used to quickly enforce the company’s right of inspections of certain objects and documents.
Similar to the attachment, the company further has to state the reason why an injunction is necessary to safeguard its rights (injunction ground, Verfügungsgrund). Both the injunction claim and the injunction ground have to be supported by prima facie evidence.

Procedure
The procedure for rendering an injunction order or judgment is largely identical to the one in attachment proceedings. However, it should be noted that the court can only render a decision without an oral hearing in extremely urgent cases.
Within the limits of the motion made by the company, the content of the injunction is in the court’s discretion. In this respect, special attention has to be paid to the principle that the preliminary relief must not anticipate the result of the main proceedings. Therefore, the court will generally not order the opponent to deliver the company’s assets to the company but to a sequestrator. The court will also not order the opponent to permit the inspection of documents or other objects by the company but only by an assessor who will have to deposit his findings with the court.

Independent procedure for the taking of evidence
Electronically stored information as well as pictures, photos, films or sound recordings may be secured by the independent procedure for the taking of evidence (see above 2.3). The court may carry out the independent procedure for the taking of evidence without prior notice to the defendant (who only has to be present at the taking of evidence as such) and thus may reduce the risk of the defendant destroying relevant objects.

3.2 Use of criminal compulsory measures
German civil procedural law does not allow compulsory measures such as search of premises or seizure of assets on behalf of private persons for the purpose of gathering and securing evidence and tracing assets for civil proceedings. However, such compulsory measures are admissible in criminal investigations. They may be used also for private interests of the aggrieved person and, thus, the company could benefit from the special investigation powers for its private litigation, too.

Tracing and preserving of assets
In the course of the investigation, the public prosecutor is also entitled to trace and secure assets to support the aggrieved company’s possible civil claims which have arisen out of the alleged criminal offence (so-called Rückgewinnungshilfe). For such purpose, the possible means are also search and seizure and, furthermore, the attachment of assets.
The only prerequisite is that the company has a civil claim (eg for recovery of assets, damages or unjustified enrichment) against the accused person which has arisen out of the criminal offence. It does not matter when the company intends to enforce the claim or if it intends to do so at all.
However, whether the respective support is granted is within the discretion of the competent authority, ie the public prosecutor or the judge. The company has no enforceable right to a special securing measure. A seizure, however, will generally be ordered if the company otherwise risks not being able to enforce its claims anymore. With regard to an attachment of assets, the competent criminal authority will consider various aspects such as the company’s own possibilities to enforce its claims, the degree of suspicion, the amount of damages and the necessary financial and other expenses for the criminal authorities.

Practical aspects for reporting alleged crimes
Under German criminal law the aggrieved company is not obliged to make a report to the public prosecutor on the alleged crimes. Against the above background, however, it can be advantageous for it to notify the public prosecutor of facts which relate to the dispute and which allegedly constitute a criminal offence. The goal is to bring about an investigation. Via the special powers used in the course of that investigation it might be possible to trace and secure (otherwise hidden) assets and evidence and to make it easier, or even possible at all, to enforce civil claims.
However, only a full and frank disclosure of all facts discovered by the company itself to the criminal authorities will create the basis for a trustworthy cooperation and will increase the willingness of the criminal authorities to use their powers for the benefit of the company. Therefore, choosing this approach may cause tactical and commercial disadvantages. Company and business secrets might have to be disclosed in criminal proceedings, deficiencies in the company’s control systems might be revealed, business partners and clients could be alienated, etc.
The legal risk to a company taking this approach is, however, limited. Under German law, everyone has the right to notify the public prosecutor of facts possibly constituting a criminal offence. German law assumes that the Code of Criminal Procedure (Strafprozessordnung) sufficiently protects the legitimate interests of the accused. Therefore, should the company make false allegations, this would only result in criminal or civil liability, if the false notice was made intentionally and in bad faith in order to damage the accused.

4. CIVIL PROCEEDINGS
On the basis of the information gathered by the above means, a company which has been affected by fraud might seek to pursue the wrongdoers through civil proceedings. Given the various types of fraud that a company can suffer depending on the particular business it is involved in (bribery, theft, misappropriation of assets, etc) the company may have various remedies against its own dishonest employees or third parties. In the following, the main remedies resulting from the different possible claims are outlined.

4.1 Damages
A company affected by fraud can have claims for damages against everyone who illegally and culpably caused damage to the company. Thus, not only own employees or (former) directors who breached their duties vis-à-vis the company can be held liable, but also third parties, eg under tort law when they teamed up with or assisted the dishonest employee, handled stolen goods or bribed the employee of the damaged company.
Given the possible high amount of damage caused by corporate fraud, it can be difficult to successfully enforce a claim for damages against an individual who might lack the financial power to pay the damages. Therefore, the question whether claims for damages exist against another company can become crucial for a successful outcome of the litigation. Such damages claims may exist where another company can be made responsible for actions of its dishonest employees, eg, where these employees brought about the conclusion of a contract with the company by paying bribes. Another company could also be liable for fraud damages where it omitted to properly organise its internal systems and to supervise its employees, provided that  proper organisation and supervision would have hindered the fraud.
If the company is able to make out the claim, generally speaking the defendant is obliged to restore the position that would exist if the circumstance obliging him to pay damages had not occurred or if the restoration is not possible or not sufficient to compensate the company in money. The court cannot award punitive or treble damages as known in common law jurisdictions because damages claims under German law merely aim at the compensation of the actual losses. In principle, the defendant has to compensate any loss which was adequately caused by his fraudulent action. That obligation comprises direct damage such as the current replacement value of stolen or embezzled assets. Furthermore, it can also include subsequent damage such as loss of profit, costs for legal or other advisors (eg, for the internal investigation and/or the legal enforcement of the damages claim) or the company’s obligation to make payments to a third party arising from the fraud.
A particular question refers to whether the company is entitled to compensation for a loss in terms of an administrative fine (Bußgeld) imposed upon the company because its directors or other chief employees committed a criminal or administrative offence while acting on behalf of the company. According to German law, such corporate fine may amount to up to €1 million or even more, if this is necessary to siphon off higher profits gained by the fraud. However, at least to the extent such corporate fines aim to siphon off the proceeds arising from the fraudulent action, the company does not incur financial damage eligible for compensation as its financial situation before and after the fraudulent action remains the same.
In general, the company bringing forward the claim has to show and prove the alleged losses caused by the fraudulent action. However, it may be supported by the procedural possibility of a German court to estimate the losses where the exact calculation appears too difficult or costly (section 287 German Civil Procedure Code) or by alleviation of the burden of proof. Such alleviation, for example, has been developed by case law in favour of a company whose employee accepted bribes for awarding a contract for goods and services: the company can at least claim an amount equal to the bribe without being required to further calculate and prove an actual loss in this amount. This is based on the assumption that the bribing party will generally increase the price for the goods and services to be paid by the company by the amount of the bribe in order to refinance the bribe.

4.2 Restitution of benefits
A company affected by fraud may also have claims for restitution of benefits which another person unjustifiably obtained in connection with the fraud. Such claims can be based on the principles of unjustified enrichment (ungerechtfertigte Bereicherung) or the so-called agency without specific authorisation (Geschäftsführung ohne Auftrag). In the present context, both types of claims aim at siphoning off the defendant’s benefits gained in connection with the fraud and actually belonging to the company.
A claim for restitution based on unjustified enrichment basically requires that the defendant obtained those benefits as a result of a performance of the company or otherwise at its expense and without legal grounds for doing so. Based on such claim, a company can, for example, claim restitution of assets fraudulently obtained by an employee if he was not entitled to those assets under his employment contract. A company may also have a claim for restitution if the contract under which the company rendered assets to the defendant was null and void, eg under a contract for goods and services which was concluded because of bribery payments.
If restitution is not possible due to the quality of the benefit obtained, eg where an employee unjustifiably received services of the company or used its assets, the defendant must compensate the company for the value of the particular benefit. This also applies where the defendant is unable to make restitution for some other reason, eg, where the employee disposed of the company’s assets to a third party.
Restitution of the profits gained by the disposal of the company’s assets can only be achieved by the company in two cases. At first, this is possible if an unauthorised person, be it an employee or a third party, disposes of these assets and the decision is effective against the company; fault on the part of the unauthorised person is not required. This might happen, for example, where the person acquiring the assets from the unauthorised person gets title to them and, thus, the company is not entitled to get these particular assets back (see below 4.3). Secondly, the company can also siphon off the profits if the person handing on the assets knew that they belonged to the company and that he was not entitled to do so.
The company basically has to prove that the defendant obtained a benefit and the extent of that benefit. However, the defendant can be obliged to disclose necessary information and possibly to state an account in this respect, if the company does not know the relevant facts through no fault of its own. The company can enforce such claim for disclosure independently prior to bringing an action for restitution of an exact calculated benefit. Under certain circumstances it may also join the action for disclosure with the action for payment, with the precise statement of the benefits demanded by the company being reserved until the statement of accounts is given (action by stages, Stufenklage).

4.3 Restitution of physical objects
In case of theft or embezzlement of assets, the company may demand restitution of those particular assets including physical objects on the basis of a claim for damages (due to the defendant’s primary obligation to restore the company’s position) or based on a claim for unjustified enrichment given the prerequisites for such claims. Furthermore, the company may also have a claim for restitution of particular physical objects against any person who is currently in possession of those objects even though that person has not acted culpably or illegally vis-à-vis the company. Such latter claim for restitution of objects in the present context ordinarily requires the company to still have title to the objects in question and the particular defendant not to have a right to possess the object vis-à-vis the company.
A person may have achieved title to the stolen or embezzled object when he acquired the object in good faith, ie believing that the object did belong to the person disposing of it, be it an employee or any other subsequent possessor. Thus, the company could claim its belongings, for example, from anyone who knowingly takes them over from the dishonest employee.
However, the company may also still have title to its belongings regardless of whether the current possessor acquired them in good faith: according to German law, the company basically can not lose title to objects which were removed from the company’s possession without its consent and, thus, it may claim restitution of those objects. Where the company, however, agrees to an object being given away – even if the consent is based on incorrect assumptions because of fraud – a third party can obtain title to it. In the latter case, the company might lose its property but can claim the financial damage it suffered from the wrongdoer.