German Tycoon Disappears, Triggering Probe : Europe: 40 creditor banks agree to keep major real estate firm afloat despite his leaving billions of dollars of debt.

German authorities launched an investigation Thursday into the finances of one of the country’s biggest real estate moguls and his wife, who disappeared over the weekend, leaving behind billions of dollars of debt and an empire in disarray.

Executives of the abandoned Dr. Juergen Schneider holding company met in Frankfurt with representatives of more than 40 creditor banks seeking ways to avoid bankruptcy and to complete unfinished construction projects. They agreed to keep the company afloat, at least for the time being.

The Schneider group owns some of the most prominent commercial properties in Frankfurt, Leipzig, Wiesbaden and other German cities. Its collapse could put thousands of workers out of jobs.

On Wednesday, Chancellor Helmut Kohl warned the banks against rushing the company into bankruptcy. If bankruptcy is declared, the group’s estimated $5-billion debt would reportedly make it one of the biggest in Germany since World War II.

German newspapers, which once called owner Schneider the “Construction King” for his 80 or so projects nationwide, now have dubbed the 59-year-old tycoon a “Gentleman Bandit” and a “Fine Cad.”

Schneider and his wife, Claudia, had sole control over their companies’ accounts. He left his holding company a letter last Friday saying he had fallen ill over Easter and was told by his family doctor to retire from business immediately.

Then the couple disappeared, owing an estimated $3 billion to banks and about $150 million to contractors and suppliers.

“Somebody said he’s in Paraguay and someone else saw him in Dresden,” said Hildegard Becker-Toussaint, spokeswoman for the Frankfurt public prosecutor’s office, which launched the fraud investigation. “He’s also in the Bavarian woods. He’s seen everywhere at the same time.”

Schneider is also said to own properties in Switzerland, Brazil and the Canary Islands.

Frankfurt prosecutors began their probe after receiving a complaint from Deutsche Bank that Schneider had secured a credit for a Frankfurt shopping center based on false documentation.

The bank, which was not publicly commenting on the case Thursday, said Schneider had obtained a loan claiming that the fancy Zeil-Galerie center had more than twice the space and seven times the rent-earning potential than it actually had. Deutsche Bank was the Schneider group’s largest creditor, with loans estimated at about $757 million. The bank lent the company $241 million for the Zeil-Galerie.

“This is just one little bit (of the fraud), and Deutsche Bank started with this. It’s only one bit. It will come piece by piece,” Becker-Toussaint said.

Following the meeting between bankers and Schneider managers, Michael Kramer, a director of Deutsche Bank, said a coordinating committee had been established to keep company projects going.

“The coordinating group is ready to supply the necessary personnel and administrative costs within limits,” Kramer said. “Based on the given information, we have to assume that the companies won’t be able to run in the long term.”

Schneider was known as a vain man and dapper dresser, with gray temples under a black toupee and rectangular reading glasses. He lived in a fairy tale villa called Andreae in posh Koenigstein, outside of Frankfurt. He traveled the country by private Lear jet.

The son of a construction firm owner, Schneider was an engineer who worked for several years at the Frankfurt-based Philipp Holzmann building group before founding his own company in 1981. He was known for paying his bills late, but bankers considered him a trustworthy businessman.

German newspapers criticized the banks for lending so freely to Schneider with so little scrutiny of his business.

“Once again, one has to wonder about the behavior of the money houses: The bankers monitor medium-size companies minutely regarding credits, (and) with the big ones they turn two blind eyes,” wrote the Berlin newspaper, Der Tagesspiegel.

In January, 120 banks were forced to put up about $2 billion to bail out the Metallgesellschaft metals and engineering group, which had about $5.5 billion of debt. Deutsche Bank was the biggest creditor there too and also a member of the board.

In this case, most of the loans to Schneider are believed to be secured by properties.

The failure is not expected to hurt the banks as much as small businesses and workers, particularly in the eastern city of Leipzig, where Schneider had huge projects.

Schneider was fond of buying dilapidated historical buildings and renovating them. But he would keep them and collect rents, rather than sell for high profits as is normal among developers.

“Design, this is my life’s elixir,” Schneider told the Frankfurter Rundschau newspaper in a recent interview.

German newspapers and television reported workers on Schneider construction projects in tears and worried subcontractors pulling their machinery out of buildings that they feared might be seized by creditor banks. Schneider accounts are frozen, and company managers have no funds to pay workers or debts.

German television quoted the head of the state of Hesse, Hans Eichel, as saying that he had been told by Deutsche Bank’s Chief Executive, Hilmar Kopper, that Schneider projects will be completed.