GERMAN INDUSTRY — A GANG OF FRAUDSTERS?

Siemens, Deutsche Bank, Volkswagen, Daimler, BMW, Audi, Wirecard, FlowTex. In twenty years, German industry has produced a series of fraud scandals whose density, audacity, and systematic cover by politics and regulators are unparalleled in Western industrial history. The conventional explanation: bad apples. The correct explanation is structural.

I.

The question sounds outrageous. So does the answer.

Between 2005 and 2025, German industry produced a series of fraud scandals that are unparalleled in Western industrial history — not in their criminality (that exists everywhere), but in the density, the brazenness, and the systematic shielding by politics, regulators, and auditors. Unparalleled in the structure that enables, protects, and reproduces fraud.

Here is the list. Incomplete:

Siemens (2006): Slush funds in Austria, Liechtenstein, and Switzerland. Hundreds of millions of euros in bribes, systematically distributed over years, across every continent. Not one corrupt manager — an institutionalised system of bribery that had grown over decades. Cost: 2.9 billion euros in fines, back taxes, and legal fees.

Deutsche Bank (2005–2011): Cum-ex and cum-cum transactions. The largest tax plunder in the history of the Federal Republic. Estimated damage to the treasury: over 10 billion euros. Dozens of banks involved, but Deutsche Bank at the centre. An industrialised method of robbing the state — disguised as a financial product.

Volkswagen (2015): The diesel affair. Eleven million vehicles worldwide fitted with defeat devices that produced different emission readings on the test bench than on the road. Not one engineer, not one department — a system pervading the entire corporation, encompassing development, production, quality assurance, and the executive board. Cost: over 30 billion euros. According to MIT calculations, up to 1,200 premature deaths in Germany alone from the excess nitrogen oxide emissions.

Daimler, BMW, Audi (2017–2021): Emissions manipulation in various forms, antitrust violations in coordinating emissions treatment. Not one manufacturer — the entire German premium automotive industry.

Wirecard (2020): 1.9 billion euros that never existed. A DAX corporation whose balance sheets were falsified for years. The auditors at EY certified them. BaFin protected the company and went after the journalists who uncovered the fraud. The political establishment — led by the then finance minister Olaf Scholz — looked the other way.

FlowTex (2000): Over 3,000 horizontal drilling machines sold, most of which existed only on paper. A Ponzi scheme in the heart of the German Mittelstand.

Corona mask affair (2020–2021): Conservative politicians who personally profited from the procurement of protective equipment while people were dying.

These are not isolated cases. This is a pattern.

II.

The conventional explanation is: greed. Individual managers who turned criminal. Bad apples in an otherwise sound system.

This explanation is wrong. It is not merely wrong — it is itself part of the system. Because it prevents the question that ought to be asked: Why does this system so reliably produce fraudsters?

The answer lies in a structure that Prof. Erich Häußer, former president of the German Patent Office, described as early as the 1990s as the "Cartel of Ignorance." Häußer meant the systematic blockade of innovation by a web of interest groups profiting from the status quo. But his concept reaches further than he himself may have intended. The Cartel of Ignorance is not merely an obstacle to innovation — it is a fraud machine.

Why?

Because a system that rewards conformity and punishes dissent inevitably produces people who go along rather than think. The engineer at VW who programmed the defeat device was not a criminal. He was an employee who did as he was told. The auditor at EY who certified Wirecard's balance sheets was not an accomplice. He was a service provider who did not want to lose his client. The BaFin official who investigated the Financial Times instead of Wirecard was not a corrupt civil servant. He was a bureaucrat who respected the hierarchy.

None of them was evil. All of them were obedient. And that is precisely the problem.

III.

The German economic system rests on a principle that is rarely called by its name: vassaldom.

The term sounds medieval. The principle is thoroughly modern. It works like this:

The employee is vassal to his superior. The superior is vassal to the board. The board is vassal to the shareholders — and simultaneously vassal to a political class that treats industrial policy as electoral policy. The regulatory authority is vassal to the ministry, which in turn is vassal to the industry it is supposed to oversee. The auditor is vassal to his client, who pays him and can replace him at will.

In this cascade of dependencies, there is no position where someone can say "no" without personal risk. Whoever objects, risks his career. Whoever exposes, is punished — not rewarded. Whoever asks questions, disrupts operations.

This is not a conspiracy. It is worse: it is a system that produces fraud as rational behaviour.

In game theory, this is called an equilibrium — a state in which no individual actor has an incentive to change his behaviour, even though the collective outcome is bad for all. The engineer programming the defeat device knows it is wrong. But he also knows he will be fired if he refuses. And he knows his successor will do it anyway. So he complies. Rational. Obedient. Guilty.

IV.

There is a word that runs through German corporate culture like a red thread: loyalty. Loyalty to the company. Loyalty to the brand. Loyalty to the boss. Loyalty to the system.

What presents itself as a virtue is in truth a trap. Because loyalty without conscience is complicity.

The diesel scandal is the perfect case study. At Volkswagen, hundreds of people knew — engineers, test engineers, department heads, board members. None went public. Not because they were all criminals, but because the system has no language for dissent. There is no word in German corporate culture that positively connotes the opposite of loyalty. Whoever talks is a traitor. Whoever exposes is disloyal. Whoever raises the alarm is a Nestbeschmutzer — one who fouls his own nest.

The whistleblower — in Anglo-Saxon culture a respected figure, protected by law — is in German corporate culture a tragic one. He loses his job, his reputation, his social connections. Often he ends up in court — as the defendant, not the witness.

Germany only got a whistleblower protection law in 2023. The EU had to force it. German business lobbied against it to the very end.

That says everything.

V.

There is a second mechanism that feeds the fraud: the symbiotic relationship between industry and the state.

In Germany, the boundary between business and politics is porous. Not in the sense that politicians are bribed — that happens, but it is not the core. The core runs deeper: the German state understands itself as a service provider to industry. Industrial policy is regional policy is labour market policy is electoral policy. Whoever protects industry protects jobs. Whoever protects jobs gets re-elected.

In this logic, fraud becomes collateral damage to be tolerated. The Federal Transport Ministry under Alexander Dobrindt (CSU) did not investigate after the diesel scandal — it covered up. Transparency International accused the ministry of systematically withholding information. Not out of corruption, but out of reason of state: Volkswagen employs 300,000 people in Germany. What harms VW harms Lower Saxony. What harms Lower Saxony harms the CDU — and the SPD, which sits on the supervisory board.

In the Wirecard scandal, BaFin filed criminal charges for market manipulation — against the journalists at the Financial Times who uncovered the fraud, not against the fraudsters. This is not a failure of oversight. This is oversight that has redefined its mission: not to protect the public from fraud, but to protect industry from the public.

Corporatism — the close interweaving of state, industry, and unions that founded Germany's economic miracle — has transformed from a success model into a cartel. A cartel that protects its members, covers for its members, and moves collectively against anyone who questions the rules of the game.

VI.

There is a third mechanism that completes the system: the absence of consequences.

Rupert Stadler, former CEO of Audi, was convicted of fraud and sentenced to one year and nine months — suspended. Probation. For a fraud against millions of customers that may have caused hundreds of premature deaths.

Martin Winterkorn, former CEO of VW, has been on trial for years. The proceedings drag on. Meanwhile, he draws a pension estimated at several thousand euros per day.

The case against VW Group CEO Herbert Diess and supervisory board chairman Hans Dieter Pötsch for market manipulation was dropped upon payment of nine million euros. Nine million — against personal fortunes many times that amount. That is not a penalty. That is an administrative fee.

In the United States, Winterkorn would be in prison. In Germany, he is presumably writing his memoirs.

Germany has no corporate criminal law. There is no way to hold a company criminally liable as an entity. Every attempt to introduce such a law is torpedoed by the business associations. The justification: it would endanger competitiveness.

One must read that sentence twice to grasp its obscenity: the ability to punish companies for systematic fraud would endanger competitiveness. As though fraud were a competitive advantage to be protected.

Perhaps it is.

VII.

The question was: "German industry — a gang of fraudsters?"

The answer is more differentiated — and simultaneously sharper: No, German industry is not a gang of fraudsters. It is a system that systematically produces, protects, and rewards fraud.

And the "Cartel of Ignorance" that Prof. Häußer described supplies the ideology: one does not know because one does not want to know. One does not ask because the answer would disrupt operations. One looks away because looking would have consequences — not for the fraudsters, but for the one who looks.

VIII.

One might object: fraud exists everywhere. In the United States there was Enron, WorldCom, Bernie Madoff. In Britain there was LIBOR. In Japan there was Toshiba and Mitsubishi. Why should Germany be worse?

Germany is not worse. It is different. And the "different" is revealing.

In the United States, fraud is punished hard — and the system learns from it. After Enron came Sarbanes-Oxley. After the financial crisis came Dodd-Frank. The laws may be imperfect, but there is a mechanism of self-correction: scandal, outrage, reform.

In Japan, fraud leads to public loss of face — the sharpest sanction Japanese culture knows. Managers resign, bow, vanish. The system corrects itself through shame.

In Germany, neither happens. There is no reform after the scandal, because the reformers are the same people who enabled the scandal. There is no shame, because German business culture places pragmatism above morality. What remains is a shrug and the sentence: "These are isolated cases."

Siemens, Deutsche Bank, VW, Daimler, BMW, Audi, Wirecard, FlowTex. Isolated cases. All of them.

IX.

Häußer warned thirty years ago: "If we do not succeed in breaking through the Cartel of Ignorance that causes this, we will within a foreseeable time become a low-wage country ourselves."

He meant the blockade of innovation. But his warning applies equally to fraud. Because the two are connected. A system that prevents genuine innovation — because it means risk, because it disrupts the status quo, because it raises uncomfortable questions — must secure its competitiveness by other means. If you cannot be better, you can cheat. If emission standards cannot be met with clean technology, you programme a defeat device. If the balance sheet does not add up, you invent 1.9 billion euros. If the contract only comes with bribes, you maintain slush funds.

Fraud is the innovation-refusal of the lazy. And Germany has chosen to be lazy.

Not all of it. Not everyone. But the system.

X.

The question with which this essay began was provocatively formulated. The answer is sober:

German industry is not a gang of fraudsters. But it has built a system in which fraud thrives like mould in a damp basement. The dampness is vassaldom. The warmth is corporatism. The darkness is the absence of consequences.

And as long as nobody opens the window, the mould will grow.

Siemens: 2.9 billion euros in fines for systematic bribery. Deutsche Bank: over 10 billion euros in damage through cum-ex. Volkswagen: 30 billion euros in costs, up to 1,200 premature deaths. Wirecard: 1.9 billion euros invented, BaFin prosecuted the investigators. No corporate criminal law. Suspended sentences for billion-euro fraud. And the justification for why this must not change: it would endanger competitiveness. This is not an isolated case. This is an operating system.