Quick Insight

Whiste Blowers Allege Corruption in Controversial German Project

This week, the Financial Times reported on a series of allegations made against Deutsche Bahn officials relating to the controversial Stuttgart 21 project. The project, which has already been dubbed “Germany’s most divisive rail project”, is facing renewed criticism in the wake of the allegations following years of concern over endemic cost and time overruns.

Today, our Quick Insight blog is giving you the low-down on this newest development in an already contentious history.

What is the Stuttgart 21 Project?

The Stuttgart 21 project was announced in April 1994 to much excitement from Germany’s political parties and support from the European Union. It was sixteen years later when construction finally got underway. The project has been called the most ambitious upgrade to public rail transport in Germany since the 19th century. In the planned modifications to the Stuttgart rail hub, 57km of new track are set to be laid to facilitate long-distance, regional and suburban train journeys, which will contain 33km of tunnels and four new stations. The project is being funded by Germany’s government, the European Union, the state of Baden-Württemberg and Stuttgart city.

The project has been compared to the infamous Berlin Brandenburg Airport, which took thirty years to deliver and famously missed seven opening dates. In terms of cost, estimates have ballooned in the years since the project was announced. In 2009, the estimated cost of the railway was €4.5bn. When construction began in 2010, it went ahead on condition that the overall cost of the project would not exceed this €4.5bn figure. In 2013, a new estimate of €6.5bn was announced.

The project has been controversial from the start. Professor Dr Christian Böttger, a railway organisation and finance expert from Berlin’s University of Applied Sciences for Engineering and Economics has argued that the project has “separated supporters and opponents in the region in a way we have not seen in Germany for decades”. Indeed, in 2010, local opposition to the project reached a fever pitch when police used water cannons and tear gas to disperse protestors who were attempting to prevent project teams from removing trees as the project began to get underway.

What is being alleged?

News of two whistle blower allegations broke in the Financial Times late week. The whistle blowers are alleging that “some senior staff at the state-owned railway company misused corporate funds as part of widespread fraud at one of Europe’s largest infrastructure projects”. One specific incident arose in 2016, when Deutsche Bahn’s compliance department received numerous warnings that budget inflation was being caused by “glaring mismanagement and suspected corruption”. In this incident, unnecessary work was taken on in the form of an electrical substation that was not in the original master plan. A €2m contract was awarded to construct the substation, despite an alternative solution being available for only €30,000.

The whistle blowers further alleged that their detailed calculations demonstrated that the company had been deprived of €600m through “illegal and improper conduct”.

What do the allegations mean for the future of the project?

While Deutsche Bahn strongly denies the allegations, claiming that nothing untoward was found during an internal investigation, the news is yet another hit to already dire public opinion of the project. This being said, it is expected that the project will press ahead, especially due to the fact that the allegations are now five years old.

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Author:

Madeleine Jones Casey

Madeleine Jones-Casey

Business Writer at Foresight Works

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