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A PR catastrophe: FT investigates German insurer's outrageous Gellért Bath party

In May 2011, the German press discovered and reported that Hamburg-Mannheimer Insurer (HMI) had organised an “incentive trip” of the HMI sales organisation in 2007, PR columnist of the Financial Times summerizes the story in its recent European edition. Drug abuse has also been reported, what's more, HMI deducted the expenses for the trip from its taxes as a business expense, FT adds. Media responses of Ergo HMI's parent company were slow and defensive which had a lasting impact on the comapny's pubic reputation.

According to German press reports this May, Hamburg-Mannheimer organised an “incentive trip” of the HMI sales organisation in 2007, Daniel Diermeier writes in the Financial Times. The company had rented the famous Gellert Baths and hired several prostitutes, FT columnist quotes German press sourcess. It was also reported that members used cocaine during another trip, though a company spokesmen denied those claims and instead described a “drinking game with salt, tequila and lemon juice”. In addition, HMI had deducted the expenses for the trip from its taxes as a business expense.

A few weeks later, the German press reported that during 2005-06 HMI had overcharged thousands of customers for a state-subsidised retirement product.

The initial company response was slow and defensive, FT columnist claims. Company spokespeople defended the tax deduction of the Budapest trip as an appropriate business expense and pointed out that the company had received no customer complaints about overcharging.

The moral of the story is clear, FT columnist claims. "The Budapest event not only led to moral outrage, but created sustained public interest for additional allegations of wrongdoing", for which Ergo’s leadership "appeared unprepared", FT summs up the object lesson.