From Bloomberg Businessweek, September 29:
How P&R Containers shifted from shipping to the more profitable business of simply ripping people off.
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%....
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