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Shipping containers. Typical ones are a standardized size of 40ft (12.2m) by 8ft by 8.5ft and have the name of the owner painted in enormous lettering on the side. So hard to miss. The question, then, is how do you lose a million of them?

That’s what thousands of investors in the P&R Group have been left asking after the container leasing company went bankrupt and it emerged that it owned a million less containers than it had claimed. Some 54,000 investors are thought to be out of pocket as a result, with a total 0f more than $4 billion thought to have gone up in smoke.

They had thought they were on to a good thing. P&R’s attraction was simple enough: Investors bought containers for around $3,000 and P&R then rented them to shipping companies before buying them back after five years. For a while, investors received handsome returns.

But in March this year, the company declared bankruptcy out of the blue, triggering Germany’s biggest ever corporate meltdown. And on Thursday, things went from bad to worse: Administrators announced that although the company had sold 1.6 million containers, it actually owned just 600,000. Public prosecutors in Munich confirmed they were investigating the missing million, with the company’s senior management the prime suspects.

The problems go back many years. Auditors examining P&R’s complex web of subsidiaries and ancillary companies say 600,000 containers were already missing in 2010. Despite this – or perhaps because of it – P&R continued to suck in new investors. In 2013, investment in containers reached around €1 billion, an all-time high. The fresh money seems to have kept the scheme going, until the wheels came off two months ago.

P&R always appeared outwardly reputable. Managers and directors seemed serious, solid types, according to investors, and the firm had a glitzy HQ in an expensive Munich suburb. But the signs were there. In 2004, Heinz Roth, the firm’s enigmatic founder, said in one of his few public pronouncements: “Thank God no one has noticed us in 29 years of business. We don’t need publicity.”

Mr. Roth owns the only still solvent part of P&R, its Swiss container leasing business. But German insolvency administrators have no jurisdiction in Switzerland, so they cannot use Swiss-based assets to pay off P&R’s German creditors. The founder has adamantly refused to cooperate with German authorities. But with prosecutors moving in, things could soon get tricky for Mr. Roth.

Investors have also criticized the German financial regulator BaFin. It examined P&R’s prospectus just 18 months ago, but gave the company a clean bill of health, despite contradictory entries in its payments records. BaFin says it cannot be sued by individuals, no matter how irate. But lawyers for P&R’s investors say they intend to sue the company for damages at the very least.

Individual P&R investors, many of whom have lost their life savings, can do little. Some have set up self-help groups: “It helps to talk about it,” says one, who wished to remain anonymous. “You don’t feel so alone.” Even experienced lawyers are shocked by the extent of the scandal. “It’s a total meltdown, and this is going to get ugly,” said Marc Gericke, a bank and capital markets lawyer.

The last remaining hope for small investors is that the sale of P&R’s 600,000 remaining containers may recoup a small proportion of their money, although more than 25-30 percent seems unlikely. And that process will take months. In the meantime, all investors can do is rue the day they heard of a foolproof container-leasing scheme.

Author: Gertrud Hussla -   global.handelsblatt.com