The BVK pension fund forfeited American investments, prosecutors say

Munich prosecutors raided German pension fund group BVK over its troubled U.S. real estate investments just two days after investigators searched Deutsche Finance Group’s asset manager as part of a probe.

The corruption probe is targeting a former and current employee of BVK who was involved in real estate investments and a member of DFG management, Munich prosecutors said in an emailed statement on Thursday. They also raided three private apartments in and around Munich.

The investigation is focused on BVK’s “loss-making” investments in “seven real estate projects in New York, Miami Beach, Beverly Hills, Chicago and San Francisco, implemented with the involvement of DFG,” the agency said.

BVK’s U.S. real estate investments have come under public scrutiny in Germany as the group posted heavy losses on parts of the U.S. real estate it ties to Deutsche Finance and real estate development firm SHVO, owned by New York developer Michael Shvo. BVK oversees €122 billion in pension assets for 2.8 million people in Bavaria, from doctors and lawyers to theater workers and chimney sweeps, making it Germany’s largest public sector pension group.

Munich investigators suspect BVK employees of “improper influence” on BVK’s real estate investments as well as on decisions to provide additional capital to sustain these projects.

In return, he allegedly received benefits for himself and others from a member of the DFG management. He is accused of accepting invitations to top restaurants in Munich, London, Los Angeles and New York, as well as staying in a suite at a luxury hotel in New York, the statement said.

BVK has previously said it may eventually write off up to 853 million euros of the roughly 1.6 billion euros it has invested in these properties, with 392 million euros of that already done by the end of last year.

Munich prosecutors did not mention Shvo or his company on Tuesday and Thursday, and neither was charged with wrongdoing.

BVK and Deutsche Finance did not immediately respond to emails seeking comment.

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