Did Lucerne public transport managers siphon off millions? Mysterious letters from Rösti and Sommaruga appear in court

Five former executives of the Lucerne public transport company (VBL) are on trial. The prosecution accuses them of having swindled several million francs through fictitious invoices and unauthorized interest.

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4.32 p.m.

"They wanted to undermine the subsidy law"

The accused deliberately made untruthful statements to the purchasers (i.e. VVL and BAV, editor's note) regarding the billing practice with imputed interest including return on equity, the public prosecutor states. The aim was: "They wanted to undermine the Subsidies Act."

The VVL had been trying for years to put a stop to the "cleverness" of the accused. This is clear from the files.

4.18 p.m.

Public prosecutor: "Target agreement was the game changer"

The public prosecutor outlines the charges again at the beginning of his plea: The defendants are accused of multiple counts of fraud as well as benefit and contribution fraud. He also referred to the FOT report from 2012, which was mentioned several times, and said that based on this report, the defendants could not be accused of culpable conduct in the years 2012 to 2016. However, this changed with the target agreement that was concluded: "That was the game changer," says the public prosecutor.

The VBL Group is alleged to have received excessive subsidies for years with internal imputed interest charged by the parent company of the public transport subsidiary. And this despite the fact that all the accused knew that this practice was no longer permitted under the transparency targets in the target agreement.

3.37 p.m.

Prosecutor's plea follows after the break

The prosecutor's closing statement will conclude today's trial. Before that, however, there will be a break until 4 pm.

3.33 p.m.

Letters from federal councillors tip the scales?

The round of questioning is over. Norbert Schmassmann's lawyer then submits further documents as evidence - including minutes of meetings of the Board of Directors, several e-mails and a letter from Federal Councillors Sommaruga and Rösti. It is not yet clear exactly why: "The background will become clear to you in my plea," says the lawyer. His plea is expected to take place tomorrow.

The prosecutor is not very pleased about the last-minute requests for evidence: "The defense's tactics are obvious: they want to prevent the prosecution from being able to prepare seriously."

3.05 pm

"Without the Postbus scandal, we would still be doing this today"

The pivotal point remains the contractual clause regarding transparency targets (see entry at 9.59 am). Here, too, he refers to the fact that the target agreement was only binding for the subsidiary.

The criminal complaint was only brought as a result of political pressure on the FOT. "If there hadn't been the Postbus scandal, this would still be the case today," says the defendant.

2.57 p.m.

Target agreement did not prohibit interest practice

The last defendant to be questioned is the former Head of Finance. His opening statement is similar to that of his predecessors: "The target agreement was concluded between the subsidiary vbl AG and VVL. And we have stuck to it."

He also refers to the FOT report from 2012, saying that the company had adhered to this report and had been able to offer imputed interest rates even after the 2017 target agreement because the target agreement did not prohibit the parent company from doing so.

2.45 pm

Was there fraud? "No"

"Did you ever have any indication that one of the defendants decided to defraud VVL of subsidy money?" the defendant is asked. His answer is short and sweet: "No."

2.38 pm

"That's not a good feeling"

Like the defendant before him, he also questions the legitimacy of the charges: "I don't understand why I'm here." He has been campaigning for public transport for 22 years. "I had a job to do and I did it. I never had the feeling that I was doing anything wrong."

The criminal proceedings are very upsetting for him. "It's not a good feeling," says the accused. He hopes that the proceedings will soon come to an end.

2.24 pm

"Never said or signed anything wrong"

When asked about the offer relating to the 2018/2019 timetable years, the defendant says that he assumed that the practice of charging imputed interest was known to the purchasers, i.e. the VVL and the FOT. He justifies this with an expert opinion from the FOT from 2012: at that time, the FOT examined the VBL and found nothing wrong with the practice of charging imputed interest.

Since then, no one has ever demanded a change to this practice. "In any case, I am firmly convinced that I never said or signed anything wrong," says the defendant.

2.07 p.m.

The trial is back on

After the lunch break, the management employee who was responsible for the offer and the preparation of offers at the time is now due to be questioned.

12.56 p.m.

Lunch break

The trial is interrupted for the lunch break. It is due to resume at 2 pm.

12.55 p.m.

"Can't understand why we're sitting here today"

When questioned by a lawyer, the defendant repeats his position: "Both VVL and the FOT knew about the imputed interest." In addition, the annual accounts were submitted to the FOT every year and no inquiries were ever made about the imputed interest.

Furthermore, an external report from 2020 made no mention of any fraudulent actions by the operational management. However, in the same year, in November 2020, the public prosecutor filed criminal charges against the accused. The defendant says: "I cannot understand why we are sitting here today."

12.22 p.m.

"I firmly expect an acquittal"

At the end of his questioning and before any supplementary questions from the public prosecutor, the accused says: "I have never had a conflict with the justice system in my entire life." He had acted to the best of his knowledge and belief at the time. "I firmly expect an acquittal, but the damage to my reputation caused by the media coverage has already been done and is irreparable."

He had always assumed that VVL and the FOT knew at all times that the VBL Group was charging imputed interest.

12.08 p.m.

"Then I would never have made such an offer"

He is also asked about the clause in the transparency targets (see entry at 9.59 am). He suspects that VVL insisted on this wording "because it wanted more transparency". But he emphasizes again: "VVL made the target agreement with the subsidiary. If it had also applied to the parent company, I would never have made an offer with imputed interest."

12.02 p.m.

"I expect those responsible for VVL to know this difference"

The defendant is currently providing detailed information about the bookkeeping and individual items in the account plan. He responds to the accusation that the actual profit of VVL was deliberately withheld from VVL: "There is a difference between operational accounting and financial accounting. I expect those responsible at VVL to be aware of this difference."

Financial accounting mainly records financial transactions such as income, expenses, profits and losses. In addition to financial information, operational accounting also records operational data such as production quantities, stock levels and cost structures.

11.37 a.m.

Critical questions to the transport association

The defendant points out in advance that both the VVL and the BAV had obtained operating resource approvals that included the imputed interest. "VVL and BAV were aware of the billing modalities," he says.

He raises two questions: "Why did VVL not clearly state in the target agreement that it also applies to the VBL parent company? And why did VVL not insist that imputed interest be calculated?"

In its actions, the operational management had always assumed that the target agreement only applied to the subsidiary vbl AG.

11.25 a.m.

It continues

The questioning of the former Head of Accounting is now pending.

11.00 a.m.

Schmassmann consults with lawyer

A lawyer puts several questions to Norbert Schmassmann. He quotes from a report from 2016 in which the VBL's settlement modalities are discussed. Schmassmann retires to an adjoining room for consultations with his lawyer. His comment on his return to the courtroom: "I don't want to comment on this."

The trial is now interrupted for a 15-minute break.

10.22 a.m.

Schmassmann emphasizes: "We did not act alone"

At the end of his questioning, Schmassmann has the floor: "When I look back on my 26-year VBL career, a lot has changed." There have been changes throughout the industry over the years. At an operational level, we have always had to think about what can be retained and what needs to be changed.

However, Schmassmann emphasizes: "The strategic responsibility always lay with the Board of Directors." All strategic decisions were always made in consultation with the Board of Directors. "I informed the Board of Directors in writing about all important business transactions. We did not act alone."

10.04 a.m.

"Everything was done in line with the Board of Directors' guidelines"

On the basis of the target agreement, Schmassmann signed several offers after it was concluded. The court referee wants to know whether he deliberately accepted a lie because he knew that the contract clause described (see last entry) would not be complied with. Schmassmann denies this: "Everything was done in accordance with the specifications of the Board of Directors."

The VBL invoices had always been approved. The Federal Office of Transport also applied a "tolerant practice" until the Postbus subsidies affair. "Then the screw was tightened". The FOT wanted to divert attention from its own failings with criminal charges.

9.59 a.m.

Focus on a contractual clause

Between 2017 and 2021, negotiations took place between the VBL Group and the VVL and the FOT regarding the target agreement. In this context, transparency targets were agreed, including the point that the subsidiary vbl AG confirms that it will not take into account any profit surcharges or interest on equity in regional and local transport services entitled to compensation. The public prosecutor's office accuses the accused of having signed this formulation even though they knew that interest on equity would continue to be charged.

Norbert Schmassmann emphasizes that they were under pressure during the negotiations because 2017 began without a contract. "This created additional time pressure," says Schmassmann. He can no longer remember exactly how the "finesse" of the negotiations led to the transparency targets being formulated.

9.29 a.m.

"Everyone knew it, we just carried it out"

Since the existence of the holding structure, VBL AG has made an annual dividend payment of one million francs to the City of Lucerne, the owner of VBL AG. In this context, an external investigation revealed that the dividends were financed with subsidies.

Schmassmann says he is glad that this investigation took place. "We have carried out at the operational level what was wanted by the responsible bodies, the Board of Directors and the Lucerne City Council." He cannot understand why some political decision-makers argue that they knew nothing about the financing from public funds. "Everyone knew about it," says Schmassmann.

9.11 a.m.

Former director Schmassmann is now being questioned

Former VBL director Norbert Schmassmann is the second defendant to appear before the panel of judges.

The billing mechanism, which is the main component of the allegations, and the holding structure of the VBL Group go back to a decision made by the Board of Directors in 2009, explains Schmassmann. In the years before the PostBus scandal, which Schmassmann calls the "old public transport world", this practice was widespread and applied accordingly. After the PostBus scandal, the Federal Office of Transport (FOT) stepped up checks and wanted to demonstrate decisive action with criminal proceedings.

In contrast to the interviewee before him, Schmassmann appears composed and provides detailed information.

8.57 a.m.

"The situation is very stressful for me"

The court referee speaks to the former deputy director about the various accusations. However, the accused does not want to go into detail. He answers all questions directly relating to the allegations against him by referring to his statement to the public prosecutor.

"The situation is very stressful for me," he says at the end of the interview. "I hope that we can now close this chapter once and for all."

8.40 a.m.

Impression before the start of the trial

8.34 a.m.

"That's all I have to say"

First, the former deputy director of the VBL has to provide information. "I've already given evidence to the public prosecutor, that's all I have to say," he says when asked about the allegations.

8.27 a.m.

The questioning of the accused is about to begin

The case is presided over by criminal court president Bernard Holdermann. At the start of the trial, he explains the procedure. There are no preliminary questions. There is also no reading out of the indictment. This is followed by the questioning of the accused in the evidentiary proceedings.

8.20 a.m.

The trial begins

The doors open five minutes late. The courtroom is full. The trial at the Lucerne Criminal Court begins - albeit in the Radisson Blu Hotel because the court's infrastructure does not allow for a trial with so many participants.

8.11 a.m.

Trial delayed

Journalists and spectators are not yet allowed into the courtroom and are waiting in the anteroom. The start of the trial is likely to be delayed accordingly. Around 20 spectators are present. They are joined by half a dozen media representatives.

8 a.m.

Trial starts at 8.15 am

The three-day trial against the VWL executives is due to start at 8.15 am. There is a large crowd, so the trial does not take place in the courtroom, but in the Radisson Hotel in Lucerne.

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Five executives of the Lucerne public transport company (VBL), including former director and CVP cantonal councillor Norbert Schmassmann, will stand trial in Lucerne's criminal court from Tuesday on suspicion of multiple fraud. According to the indictment, they are alleged to have defrauded the Lucerne Transport Association (VVL) and the Federal Office of Transport (FOT) of several million francs.

The focus is on internal settlements between the parent company VBL AG and the subsidiary vbl AG. A former VBL director and four other former members of management, two of whom are still in management positions at VBL today, have to answer for fraud. The case involves 2.1 million francs.

The public prosecutor's office accuses the accused of having faked services and products between the companies. According to the indictment, invoices were used to shift money from one company to another. In addition, imputed interest was charged on equity that was never approved by the relevant authorities.

This unauthorized interest flowed into internal transfer prices and was used, among other things, to finance the annual dividend of one million francs to the city of Lucerne.

Postbus scandal exposed problems

When the Postbus scandal became public in 2018, VVL and BAV intensified their controls. According to the public prosecutor's indictment, the accused allegedly tried to circumvent critical questions with clever wording and made false statements in reports.

Despite repeated warnings, inadmissible interest on equity continued to be included in offers for the 2018/2019 timetable years. In the opinion of the public prosecutor's office, the VBL executives were guilty of fraud with this approach. In 2017, VBL had assured VVL in an agreement that it would not charge any such interest or profit surcharges when charging for subsidized regional transport.

High repayments and reforms

After the allegations came to light, the FOT and VVL demanded a total of CHF 16 million in subsidies back in 2020. In 2024, they agreed on a repayment of CHF 21.5 million. The structure between the parent company and subsidiary was dissolved and the accounting was reformed to create more transparency.

The public prosecutor is demanding conditional prison sentences of 18 months for each of the five defendants. The presumption of innocence applies. The accused deny the allegations.

blue News will be ticking the start of the trial live from the criminal court from 8.15 am.