Former Bertelsmann boss sent to jail for embezzlement

by Reuters
Friday, 14 November 2014 17:31 GMT

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By Matthias Inverardi

ESSEN, Germany, Nov 14 (Reuters) - Thomas Middelhoff, once one of Germany's most prominent and respected business leaders, was convicted of embezzlement and tax evasion by a state court on Friday and immediately taken to jail to start a three-year sentence.

Middelhoff, who ran media empire Bertelsmann until 2002 and was later chief executive of now-defunct retail group Arcandor, was found guilty on 27 counts of embezzlement and three counts of tax evasion, Judge Joerg Schmitt told the court.

The 61-year-old, a dapper dresser who smiled on his way into the court, was ordered to be taken straight to jail -- an unusual decision -- because the judge ruled there was a risk he might try to flee to France, where he has a residence.

Middelhoff's conviction and jailing attracted widespread media attention as he has been depicted as a symbol of executive greed in a country where the pay gap between workers and managers has widened dramatically in recent years.

He is the latest captain of industry to end up convicted or in jail. Earlier this year, Uli Hoeness, president of soccer club Bayern Munich, was convicted of evading $40 million in taxes and sentenced to 3-1/2 years, while former Deutsche Post boss Klaus Zumwinkel was convicted of tax evasion and fined one million euros.

The judge said Middelhoff had caused some 800,000 euros in damage to Arcandor by, among other things, charging the costs for a private helicopter to fly him to and from his home in Bielefeld to the Arcandor headquarters in Essen -- some 120 kilometres (80 miles) -- so he could avoid traffic jams.

Middelhoff had told the court it was a legitimate business expense, but Schmitt dismissed his argument.

"We are certain that this was not commuting between two offices," Schmitt said of the 74,270 euro bill Arcandor paid for helicopter flights.

Middelhoff's lawyer Udo Wackernagel defended him as a manager who worked tirelessly to try to rescue Arcandor, which he led from 2005 to 2009.

The department store and mail order company, which until 2007 was called KarstadtQuelle, went bust in June 2009.

Middelhoff shot to fame in Germany as chief executive of Bertelsmann when he turned the sleepy family-owned media group into a major media player between 1998 and 2002. His dashing style and plans ultimately led to a falling out with Bertelsmann patriarch Reinhard Mohn. (Writing by Ludwig Burger and Erik Kirschbaum; Editing by Noah Barkin and Mark Potter)

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