Probe against Deutsche Telekom starts even as company board backs CEO

German prosecutors said Thursday that they have launched an investigation into allegations that Deutsche Telekom AG monitored managers' call records to track possible leaks of information to media. At the same time, the company, the biggest of its kind in Europe, insisted that its CEO had been aware of the transgressions but not actively involved.

Joerg Schindler, a spokesman for the prosecutors' office in Bonn, where Telekom is based, confirmed that an investigation had been launched, but did not give further details.

Earlier in the week, Deutsche Telekom said that it had uncovered the illegal monitoring in 2005 of phone call records amid claims management had spied on rebel directors and journalists to find out who was leaking information to them.

The telecommunications company has pledged a thorough investigation of the allegations, which were made public on 24 May in the weekly Der Spiegel. According to that report, Deutsche Telekom hired a consulting firm to tap phone-call records of journalists as well as company executives and supervisory board members.

That day, the company acknowledged "there were cases of misuse of call records at Deutsche Telekom in 2005 and, according to latest allegations, also in 2006." However, it insisted that the misused data included records of times and durations of calls and the participants in the conversations but not the calls themselves.

Late on Wednesday, the supervisory board said it was backing the company's boss, Rene Obermann. "Obermann had nothing to do with what happened (at the company) in 2005," Deutsche Telekom said in a statement. "... Rene Obermann therefore had nothing to hide."

It said Obermann had debated the matter with the company's then chairman Klaus Zumwinkel after an internal investigation last year but had ultimately been obliged to act in the group's interests by not publicising it.

Deutsche Telekom said that it investigated an individual case last summer, which led to a restructuring of its security department.

It says that, on 28 April, the management board received "new, broader and more serious allegations" from "an external party who had apparently been involved in the incidents and who had been commissioned by a member of the group security department." It called in prosecutors in mid-May.

The German Finance Ministry this week welcomed Deutsche Telekom's commitment to investigate the allegations and reiterated its confidence in Obermann, who took over the top job in late 2006.

The government holds a 14.8 per cent stake in Deutsche Telekom, a former state-owned monopoly, and an indirect stake of another 16.9 per cent through the state-owned KfW bank. The private equity firm Blackstone Group owns 4.5 per cent of the company.

Deutsche Telekom shares were up 1.1 per cent at €10.84 ($16.99) in Frankfurt trading.