The city court of Konigstein, outside Frankfurt, said that Dr Jurgen Schneider AG, the property ownership and management part of the private construction and property group, had declared itself insolvent.
Both Mr Schneider and his wife, who disappeared earlier this month, are under investigation for suspected fraud. The secretive company, which owns about 80 properties throughout Germany, owes the banks roughly DM5bn, as well as about DM250m to suppliers and contractors.
A Konigstein court spokesman described the ownership structure of the group, controlled by Mr Schneider and his wife through a holding company set up as a civil partnership, as totally unclear. This makes it difficult to establish which part of the group is responsible for what portion of the debts.
As the creditors and court officials sought to unravel this deliberately confusing web to see what parts of the business could be salvaged, the lending policies of the big banks came under harsh attack.
'The banks are criminally neglecting their supervisory duties and are foolishly giving undeserved preferential treatment to major customers,' said Klaus Bregger, head of the small- and medium-sized business association, which is linked to Chancellor Helmut Kohl's Christian Democrat party.
'It is all the worse that the billions of marks of losses, which the banks helped to create, must be paid for by small bank customers with their bank charges and overdraft interest and by taxpayers,' he said. Mr Bregger added that it was clear that senior bankers, who held numerous posts on the supervisory boards of other companies, were hopelessly overstretched.
This echoed similar accusations of banking negligence made earlier this year when Metallgesellschaft, one of Germany's leading industrial companies, was thrust to the brink of bankruptcy by mismanagement.
Martin Kohlhaussen, chief executive of Commerzbank, yesterday sarcastically defended the banking community. 'If we had sat here two weeks ago and the Schneider group had been discussed, many of you would have criticised Commerzbank for having so small an exposure to this admirable investor,' he said.
About 40 of Mr Schneider's creditor banks have set up a co-ordinating group to seek solutions to the property company's debt crisis, and to help out suppliers and tradesmen. Chancellor Kohl had earlier appealed to the banks to be mindful of the need to save jobs and businesses.
There were German newspaper reports yesterday that Mr Schneider and his wife had fled the country with between DM50m and DM100m in cash stuffed in up to eight suitcases. It was also claimed that the couple had made large purchases at Frankfurt jewellers just before Easter.Reuse content