International Business : German Developer’s Disappearance Has Critics Calling for Change : Banking: He obtained loans while losing millions every year. Bill would force companies to detail ownership structures.

German prosecutors have been searching far and wide for developer Juergen Schneider since he disappeared with $300 million on April 4, leaving $3.1 billion in debt and unpaid contractor bills.

Meanwhile, the banks Schneider allegedly defrauded have been trying to determine how a developer losing about $300 million a year was continually able to obtain loans. And critics are demanding changes in the business practices of top executives that run the web of banks and corporations known as Germany Inc.

In the Schneider scandal, in the near-bankruptcy of engineering giant Metallgesellschaft in January and in a billion-dollar fraud revealed this month at flooring manufacturer Balsam, well-connected men at ailing companies conducted risky or criminal business while their supervisors slumbered and the loans kept rolling in.

“Something stinks in the system,” said Thomas Schmidt, a senior aide who helped draw up business reform legislation pending in Parliament. “You or I could never get loans like these. It’s an insider’s club.”

The bill is backed by the opposition and some legislators from the conservative government. It would force German companies to detail their ownership structures, strip top executives of some of their duties on sundry boards and give shareholders more power in running companies.

But quick passage isn’t likely. It’s not likely to pass before the Oct. 16 federal elections, however. And while average Germans may end up paying for the Schneider case and other fiascoes, there is no real groundswell for reforming the banks.

“Germans are all too trusting of their bankers,” said Ekkehard Wenger, a professor of business at Wurzburg University and a critic of large corporations.

They’ve had reason to be. The tightly organized structure of the banks and corporations enabled the German Wirtschaftswunder, the country’s astonishing economic rebirth after World War II.

With top bankers and corporate executives sitting on one another’s boards and owning big chunks of each other’s businesses, they were able to smoothly coordinate a kind of privately controlled command economy.

But in the brave new Europe of open borders, quick-moving financial transfers and new competition from Asia and Eastern Europe, the tidy, chummy German business boards can’t cope, critics say.

“The oversight boards have been conquered by the industries they are meant to supervise,” Wenger said.

For example, Hilmar Kopper, the Deutsche Bank chairman, sits on the supervisory board of Daimler-Benz, Germany’s largest industrial concern, which is 25%-owned by his bank. It’s a clear conflict of interest, Schmidt said.

When a major bank such as Deutsche Bank lines up behind a developer such as Schneider, smaller banks quickly fall in line. As for the losses, consumers will end up paying the price through more expensive banking fees, said Thomas Schlier, spokesman for the German consumers union.

According to investigators, Schneider, 60, lived in a castle outside Frankfurt with his wife, Claudia, a 48-year-old heiress to a retail fortune. The developer was able to qualify for huge amounts of credit by setting up dummy corporations and getting his buildings valued at far more than they were worth, investigators say. He set up 60 dummy companies to keep the credit pouring in, they say.

Friends who used to stroll by a Munich building owned by Schneider “were sick with laughter” when they found out that the “ugly old building” had been appraised at $450 million, Wenger said.

Deutsche Bank, Schneider’s biggest creditor, expects to lose $300 million. “You have to remember that he always paid on time,” spokesman Wolfgang Schumacher said. The bank was the victim of Schneider’s “criminal energy,” he said, adding that there is no evidence to support reports that bank officers were bribed to help falsify Schneider’s appraisals.

Deutsche Bank has promised to finish the construction jobs stilled by Schneider’s bankruptcy, but when that will happen is anyone’s guess.

“It’s a pretty little mess,” said electrician Jens Doerr, one of 66 contractors in the city of Leipzig who is owed money by Schneider.