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Kolping: A Profitable Non-Profit Charity

An investigation by the European Center for Whistleblower Rights and Whistleblowing International. By Mark Worth

In Germany, the Kolping Society used to be purely a charity. By now it has become a confusing international conglomerate of both non-profit and for-profit organizations. For-profit companies, including hotels, are dominating Kolping’s activities today. The two parts are intermingling in a questionable way.

The Kolping Society was founded in 1850 as a non-profit, Catholic charity whose main purpose was to help troubled young people with job training, education and housing assistance. The Society was the life’s work of Father Adolph Kolping, a beatified Catholic priest who spent decades building dozens of “Kolping Houses” throughout Germany where wandering workers could find refuge.

Now known as Kolping International, it has grown to become one of Germany’s largest and most influential Catholic organizations – particularly in the south, where some communities are up to 85 percent Catholic. Headquartered in Cologne, Kolping has a €10 million annual budget that it says supports 147 aid projects for impoverished people in 40 countries in Europe, Latin America, Africa and Asia. Kolping’s publications and websites are filled with photographs of villagers and farmers working in fields and makeshift factories – wearing clean, crisp Kolping-orange shirts and hats.

Kolping has expanded in large measure due to its intimate ties to the Catholic Church, Germany’s ruling Christian Democratic Party (CDU), and political, cultural and religious leaders around the world. Kolping’s chairperson is blessed by the Vatican, and Chancellor Angela Merkel and former President Joachim Gauck have personally endorsed Kolping’s work. Kolping executives and members frequently gather and are photographed with dignitaries on four continents.

Kolping worked toward fulfilling Father Kolping’s original mission for more than a century. Over the past 20 years, however, Kolping and its dozens of affiliates have pursued a blatantly more commercial model.

Upscale Hotels and Coffee

Partnering financially and organizationally with many regional Catholic Church offices, and supported by millions of Euro in German and E.U. funds, Kolping has built vast webs of intertwined for- and non-profit companies.

Supported in part by public funds, many non-profit organizations under the Kolping umbrella have invested money in for-profit enterprises that also carry the Kolping name, according to company records maintained by the German Federal Gazette (‘Bundesanzeiger’). Some for-profit companies received their original start-up capital directly from Kolping non-profit organizations, records show.

Kolping’s profit-making enterprises include upscale hotels, consulting companies, a clothing recycler, a coffee company, a publishing company and various service providers with vague mandates. Many of Kolping’s for-profit companies perform functions with no obvious difference from their non-profit parents – raising questions as to why Kolping would go to the effort to establish these separate entities.

In important Catholic cities such as Augsburg, Cologne, Düsseldorf, Freiburg, Münster and Paderborn, regional Kolping headquarters serve as hubs for closely knit networks of both for-profit and non-profit companies with overlapping leadership and indistinguishable missions – often operating out of the same offices. Today, more than 120 Kolping-affiliated companies are registered in Germany alone.

These companies have separate legal identities but typically rely on each other for their existence, while often sharing the same CEOs, board members and addresses, company records show. Each company retains its own profits, capital and assets. It is not publicly known specifically how much of these profits are channeled back into charitable projects, which German law requires.

Millions in Profit and Capital Reserves

These for-profit companies have amassed millions of Euro in profit reserves over many years, according to company records. German law requires all profits to be returned to non-profit organizations and used exclusively for charitable purposes. In addition to profit reserves, these for-profit enterprises also have accumulated tens of millions of Euro in capital reserves and assets.

While Germany’s tax code affords some flexibility to charities regarding their outside business activities, they are not permitted to operate essentially as investment capital firms for the benefit of for-profit enterprises. Doing so would represent a fraud on German taxpayers who subsidize their operations, and would place a charity at risk of losing its tax-exempt status.

Mark Worth looked into Kolping’s activities. Photo: Mark Worth

These arrangements raise questions as to why Kolping would expend time and resources to set up separate companies at the same address – many of which are for-profits – to do work that is very similar to other Kolping organizations. It also raises questions about whether Germany’s tax code is too permissive in allowing charities to operate as de facto businesses and investment firms.

Meanwhile, Kolping International and other Kolping International-affiliated charities collect millions of Euro each year in public money. Most of these funds are furnished by Germany’s Federal Ministry for Economic Cooperation and Development (BMZ), which has given Kolping between €5 million and €8 million annually since 2010.

Kolping also has close relationships with various E.U. agencies and German “Job centers” that directly or indirectly subsidize Kolping education and training centers throughout Germany. Some Kolping charities that receive public funds have set up closely linked for-profit companies, raising questions as to whether taxpayers are supporting these for-profit enterprises.

The Kolping Method

There are many examples of public funds being intermingled – even if indirectly – with Kolping’s for-profit operations.

Since 2015, the E.U. has given €3 million to Kolping-Bildungswerk Thüringen e.V., whose CEO is Thadäus König, a sitting CDU member of the State Parliament of Thuringia. This non-profit organization provided the original start-up capital of €25,000 in 1998 to Kolping-Dienstleistung GmbH, a for-profit company that shares the same address in Erfurt as its non-profit parent. From 2006 to 2017, the company totaled €4.5 million in profits, and its profit reserves grew from €988,000 to €1.3 million, company records show. By way of comparison, the total spent by Kolping on aid projects in South Africa, Tanzania and Uganda in 2017 was €1.5 million.

The non-profit Kolping-Bildungswerk Paderborn is the parent organization of more than 20 for- and non-profit companies, and it is linked to many others – including hotels, coffee companies and a new consulting firm. CEO Wolfgang Gelhard is also CEO of several of these affiliates. Kolping-Bildungswerk Paderborn, which has received public funds from the E.U.’s Erasmus and Leonardo da Vinci programs, reported €5 million in profits and €10.4 million in profits reserves in 2016.

Kolping Recycling, a for-profit company that sells donated clothing in Europe, Africa and Asia, reported €1.1 million in profits in 2016. It received its €100,000 start-up capital from six different Kolping non-profits – Deutsche Kolpingsfamilie e.V. and five ‘Kolpingwerk Diözesanverband’ groups. Though officially registered as a for-profit enterprise, Kolping Recycling calls itself an “an institution of a large social association” and a “competent partner for all non-profit collection organizations” whose leitmotif is “fair–competent–social.”

Rules for Resulting Profits

Kolping brings in additional funds through membership fees paid by local members of the organization known as “Kolping Families” in Europe, Africa, Latin America and Asia. Kolping also collects revenues from interest and other fees paid by loan recipients, for instance in Uganda.

It is unknown how much of the millions of Euro in profits – if any – derived from Kolping’s for-profit enterprises have been returned to its charity operations, as required by German law. The publicly available annual budgets of Kolping International do not specifically list these profits as an income source for its charity work.

Katja Novak, a spokesperson for the Federal Ministry of Finance, said non-profit companies are permitted to “participate in or establish” for-profit companies. But, she said, “the resulting profits must always be donated to the non-profit organization, so that they are ultimately used for non-profit purposes.” This is mandated by the so-called “requirement of selflessness” in the German tax code, Novak said.

BMZ spokesperson Roderik Wickert said in an e-mail that money Kolping receives from the agency is “only intended to support the development of the social structure in specified partner countries. BMZ will regularly and extensively review the intended use of these funds.”

Top Kolping International executives, including Chairperson Monsignor Ottmar Dillenburg, General Secretary Marcus Demele and finance head Karin Wollgarten, have not responded to several interview requests to discuss Kolping’s financial practices.

Friends in High Places

A large and expanding network of Catholic Church leaders and CDU members in Germany, working in tandem with church and politicians figures abroad, has been among the keys to Kolping’s growth and success. Kolping’s top leadership is well-positioned to ensure that public funds and institutional support continue.

Every president and chairperson of Kolping International since at least 1972 were chosen by the Vatican in cooperation with the Archbishop of Cologne, who is formally designated as the “Protector of the Kolping Society.”

Some 38 current and former Bundestag members are also members of Kolping. Since at least 1986, every chairperson of Kolping’s German operations – Kolpingwerk Deutschland – has been a sitting CDU Bundestag member. Current Chair Ursula Groden-Kranich is a CDU member of the Bundestag and the Mainz City Council. Groden-Kranich is herself a hotel operator who has connections with construction companies and a local Catholic Church’s finance department.

Kolping’s long-time E.U. lobbyist is Anton Salesny, a fixture in Brussels who in 2016 received the “Pro Merito” award, the Council of Europe’s highest distinction for non-parliamentarians.

Kolping’s New Message: Tourists Welcome

Nothing more starkly illustrates Kolping’s shift to a commercial model than its pursuit to develop for-profit hotels, resorts and other upscale vacation properties.

Step inside the Kolping Hotel Spa & Family Resort in Hungary’s remote hill-country town of Alsópáhok and you can enjoy the Aqualand outdoor water park, aroma massages and authentic Lake Hévíz mud therapy. Dine on personally tailored organic, vegan and other specialty meals. Relax in child-free thermal pools and Finnish saunas. Sleep in your choice of romantic suites or apartment homes.

One of the 4-star resort’s executive officers is Werner Moritz, a ubiquitous figure who heads several for-profit and non-profit companies under Kolping’s umbrella.

These Moritz-led companies exemplify a newfound business model being replicated throughout the Kolping network: a well-planned system of subsidiaries and sister companies that differs little from a multinational corporate conglomerate. Along with Moritz, the Hungary resort’s corporate leadership includes Gebhard Kaiser, a former CSU member of the Bavarian State Parliament and the County Administration in Oberallgäu.

Merciful Brothers in Board of Directors

Leafing through records of more than 120 Kolping-affiliated companies in Germany, patterns become evident as many of the same names and addresses recur.

Prominent among them is Moritz. He is the CEO of KVG Kolping Verwaltungs, a for-profit company headquartered in the Catholic Diocese of Augsburg that owns 50 percent of shares in the Hungarian resort.

Though branding themselves as part of the Kolping charity network, the for-profit Hungarian resort netted €504,000 in 2017, while KVG recorded a profit of €147,000, company records show. By way of comparison, these profits exceeded what Kolping spent on aid projects that year in Honduras, Nicaragua and Paraguay combined. KVG also holds 100 percent of shares in the upscale Hotel Alpenblick Kolping and KurOase im Kloster in Bavaria.

Additionally, KVG Kolping Verwaltungs owns a 14 percent share in Kolping Hotel Casa Domitilla, a 3-star for-profit hotel in Rome co-owned by the non-profit Kolping International. Along with the Hungarian resort, CSU politician Gebhard Kaiser also is a director of the Rome hotel.

Kolping has received tens of millions of Euro from the German BMZ, including €7,850,000 in 2010, which comprised 69.5 percent of Kolping’s income that year. The following year, Kolping announced it had become a part-owner of the Rome hotel. The president of the hotel’s board of directors is Brother Benedikt Molitor of the Merciful Brothers of Trier (‘Barmherzige Brüder Trier’), a non-profit, Catholic health-care provider based in Koblenz.

Luxury Accommodations in 18 Countries

Molitor confirmed in an e-mail that Kolping International owns a 14 percent stake in the Rome hotel business. Molitor said Kolping’s “representative” in the hotel is Kolping International Chairperson Monsignor Ottmar Dillenburg.

Whether it is legal for German public funds donated to a non-profit charity to be removed from the charity and then invested in a for-profit business – in another country – is an open question. Katja Novak of the German Ministry of Finance said in an e-mail that the agency does not comment on the financial operations of specific companies.

The for-profit KVG Kolping Verwaltungs headed by Werner Moritz received its €850,000 in start-up capital in 2003 from the non-profit Kolping-Bildungswerk in der Diözese Augsburg e.V., which continues to hold 100 percent of shares in KVG. Simultaneously, Moritz serves as CEO of the Kolping Akademie, Kolping-Bildungs, and Kolping-Bildungswerk. He also is on the board of Verband der Kolping-Bildungsunternehmen Deutschland, a network of prominent Kolping figures, each of whom linked to his or her own organizational networks.

Raising further questions, Moritz is a CEO of both the non-profit organization that provided the start-up capital, as well as the for-profit company that received it. German law sets strict restrictions on people working simultaneously for non-profit and for-profit companies, to prevent a charity from abusing its tax-exempt status.

The Hungary resort is one of dozens of for-profit resorts, hotels, rentals and other properties developed by Kolping over the past 25 years. Tourists can enjoy luxury accommodations owned and operated by Kolping-affiliated companies in at least 18 countries in Europe, South America and Africa, including Albania, Austria, Bolivia, Chile, Italy, Mexico, Peru, Romania, Tanzania and Uganda.

Hotels and Father Kolping’s Mission

In some cases, 19th century Kolping Houses originally opened to help poor or wandering workers have been converted into upscale hotels. The Kolping House founded in Münster in 1855 is now the 3-star Stadthotel Münster, which reported €320,000 in profits and €1.2 million in capital reserves in 2017 amid a multi-million-Euro renovation. The Katholische Vereinshaus (‘Catholic Association House’) founded in Freiburg in 1866 is now the 3-star Stadthotel Freiburg, which recorded €260,000 in profits in 2017.

By way of comparison, the profits from these two hotels exceeded what Kolping spent on aid projects that year in Indonesia, Myanmar, the Philippines, Sri Lanka, Timor-Leste and Vietnam combined. It is not publicly known where these profits went. It is also unknown whether the assets of the non-profit Kolping organizations that operated the original Kolping Houses have been used to support charitable purposes, as German law requires, or transferred to private real estate developers.

Though now owned by for-profit companies, these properties continue to use Father Kolping’s name and picture, and the Kolping Society’s legacy as promotional and advertising hooks. Some hotels say they advance Kolping’s charitable mission, even though their profits are retained by standalone for-profit companies.

“Kolping Hotels & Resorts … present themselves together under a strong roof. What they all have in common are sustainable roots and values,” says Kolping’s Townhouse Düsseldorf. “All our houses are linked to the ideas of Adolph Kolping and are committed to making the core of this philosophy tangible and communicable.” Built on the site of a former Kolping House opened in 1867, Townhouse Düsseldorf is operated by KGH Betriebs GmbH. This for-profit company, which received most of its start-up capital from Catholic organizations, netted €139,000 in 2016 – 2017.

Déjà Vu: Corruption Risks Stymie Nigeria Project

Brigitte Fuzellier had just been hired as the director of Kolping’s operations in Paraguay in 2010 when she discovered that a large chunk of €1.4 million in public funds Kolping received from Germany and the E.U. did not go toward its intended purposes.

Rather than being used as a school, a Kolping building funded by German taxpayer money was being used as a brothel. An entire soccer team is said to have availed itself of the services in the Casa de Citas (“House of Appointments”), according to the ‘Spiegel’ magazine. Customers enjoyed beer and liquor before going upstairs, which was stocked with beds – “a true orgy.” The only equipment in the school was a single, poorly functioning sewing machine, Fuzellier said. After an investigation by German authorities and embarrassing media coverage, Kolping repaid €241,000 to the German government.

Recently, the potential for corruption within Kolping once again reared its head.

German government documents show that Kolping International spent more than €100,000 of public funds for a two-year project in Nigeria that was marred by mismanagement, underachievement and corruption risks.

Spanning January 2017 to February 2019, Kolping’s poverty-reduction work in Nigeria failed to meet its targets and was stopped prematurely because of “serious evidence of plans to illegally use project funds,” according to records obtained by the European Center for Whistleblower Rights (ECWR) through Germany’s Freedom of Information Act.

Kolping’s local partners in Nigeria carried out “repeated unauthorized actions,” did “deficient” work, and engaged in “improper” financial accounting that “irreparably damaged” trust, according to a August 27, 2019 report from Kolping to Germany’s BMZ, which funded the project.

Nigerian Endeavor

Despite myriad problems, Kolping kept €138,000 of the €158,000 in public funds it received for the project, officially called “Using and developing the potential of poor people – Combating poverty through social structure in Nigeria.” Kolping paid back €20,065 to the German treasury, the report said.

Nigeria is one of 12 African countries where Kolping International says it operates. Its most recent project there sought to reduce poverty in rural and urban areas in Southeast Nigeria and the capital of Abuja by helping unemployed youth and subsistence farmers. Kolping said it provided educational, advisory and material resources including sweet potato seedlings, according to the report obtained by ECWR.

The project was “discontinued prematurely,” Kolping told the BMZ, due to poor management and fears of illegal spending. In its report, Kolping either said it failed to achieve goals or provided no information that goals were met:

  • At least 60 percent of training program graduates were supposed to go on to work independently. Regarding this goal, Kolping said, “Given the small number of graduates overall, the result is unsatisfactory, even if they were successful in finding employment.”
  • Kolping provided no data regarding its goal for the standard of living to improve in at least two-thirds of surveyed households.
  • Kolping provided no data regarding its goal to apply new cultivation techniques in at least 60 percent of surveyed households.
  • Kolping provided no data regarding its goal to reach 4,000 people via five new Kolping Farmers’ Associations.

Serving Two Masters?

Last October, Kolping International celebrated the 50th anniversary since it began carrying Father Adolph Kolping’s mission overseas. Numerous videos, articles, flyers, publications and websites touted Kolping’s achievements in many countries, modest as they seem: helping a young man find a job in a Brazilian pharmacy, helping a mother of five in Tanzania get three goats to produce milk and manure, helping a woman in India buy a cow, and helping a woman in Ukraine sell her homemade jam.

Meanwhile, Kolping’s commercial dealings continue. Last December Kolping’s hotel in Bocholt, near Münster, reportedly was sold for €2 million. Thanks to a renovation and modernization project, Kolping’s hotel in Fulda saw its rating climb to “3-Star Superior.” Local media reported that Kolping’s resort in Hungary, which received the International Hospitality Award in March, could report an annual profit of €480,000. And Kolping’s 52-room hotel in Linz, Austria completed a renovation last May.

Despite Kolping’s new-found taste for commercialism and the emergence of corruption allegations in at least two countries, Germany’s BMZ continues to support Kolping International with millions of euros in public funds per year. The BMZ has issued no public statements suggesting it will stop supporting Kolping anytime soon.

Note: “Kolping International” refers to the non-profit organization based in Cologne. “Kolping” refers broadly to organizations, companies and individuals associated with Kolping International and/or with each other.

Articles or features by guest authors do not necessarily reflect the view of The Berlin Spectator.

Related article: Mark Worth: Germany Loves Whistleblowers – Unless They are German