Morgan Stanley executive investigated in Germany

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By DAVID RISING, Associated Press

BERLIN (AP) — A former governor from Chancellor Angela Merkel's party who is being investigated with the head of Morgan Stanley's German branch in connection with the sale of shares in a local power company always acted in the interests of his state, his attorney said Thursday.

Dirk Notheis, who has been on indefinite leave from Morgan Stanley since last month, and former Baden-Wuerttemberg governor Steffen Mappus are being investigated on suspicion of accessory to breach of trust and breach of trust, prosecutors said in a statement.

Notheis in 2010 helped his long-time friend Mappus, then governor, buy a 45 percent stake in the local power company EnBW on behalf of the state. The state bought it from France's government-owned utility EdF for €4.7 billion ($6 billion).

The deal — organized by Morgan Stanley and Mappus without consulting lawmakers — was later found to be unconstitutional by a state court, and a Parliamentary inquiry is still under way.

Prosecutors, citing an official probe into the purchase, said "for no obvious reasons" the state was charged €40 per share instead of the initial price cited by EdF of €39.90 — raising the cost by €11.2 million for Baden Wuerttemberg. Mappus then agreed on the price being raised to €41.50 per share "as compensation for the dividend for the year 2010 without further negotiations" — raising the price another €170 million, prosecutors said.

Mappus, was voted out of office in 2011, losing Merkel's CDU party's nearly six-decade hold on Baden-Wuerttemberg.

Germany's Bild newspaper published pictures Thursday of investigators removing files from Mappus' home in Pforzheim, and quoted his attorney Stephan Holthoff-Pfoertner as saying the evidence would show there was no breach of trust on his client's part.

"Our client always negotiated in the interests of the state of Baden-Wuerttemberg," Holthoff-Pfoertner said.

Overall, investigators searched five homes and five businesses were searched in eight cities, including Morgan Stanley's office in Frankfurt, in conjunction with the investigation.

Morgan Stanley said it is cooperating with the investigation.

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