Legal Troubles

As Creditors Close in, Former Top Manager Middelhoff Surprises Jurists By Jumping Out Courthouse Window

Thomas Middelhoff
Thomas Middlehoff. the former CEO of German media group Bertelsmann, rejected assertions by a former business partner that he was bankrupt last Friday during a court appearance in Essen, Germany.
  • Why it matters

    Why it matters

    Once one of the leading lights of German business, Thomas Middelhoff is now mostly making headlines for his many court appearances. He is currently embroiled in a legal dispute with his former business partner Roland Berger.

  • Facts

    Facts

    • Thomas Middelhoff was in court on Friday to make an oath of disclosure about his business assets.
    • The proceedings were a result of a legal dispute with Roland Berger, who claims Mr. Middelhoff owes him €6.8 million.
    • Mr. Middelhoff insisted this weekend that he is not broke, but that his bank his blocking his access to funds.
  • Audio

    Audio

  • Pdf

In the end, an attempt to flee the press made headlines.

Thomas Middelhoff, former chief executive at Bertlesmann and Arcandor, dramatically jumped out of a window to escape reporters.

Mr. Middelhoff, who is being sued by various former associates for millions of euros, was in a court in Essen on Friday for a so-called “oath of disclosure” in which he had to outline his financial assets. The hearing was the result of legal proceedings brought against Mr. Middelhoff by his former partner, the management consultant Roland Berger.

Mr. Middelhoff said that after his court appearance he jumped out of the window and grabbed a drainpipe before jumping 3 meters down onto the roof of a garage. He then jumped another 3 meters to the street. “Then I went through the back yard and, cheerfully whistling, walked to a side street where I hailed a cab,” he told the DPA news agency.

 

Mr. Middelhoff said he jumped out of a windown in the courthouse in Essen, Germany, and grabbed a drainpipe before jumping 3 meters down onto the roof of a garage, then another 3 meters (9.2 feet) to the street. He then hailed a cab, he told German news agency DPA.

Mr. Middelhoff said he was trying to flee the throng of reporters who were waiting for him after the legal hearing. He didn’t want to fall into the “media trap” that had been laid for him by Mr. Berger, he said. “There were journalists lurking outside the courthouse, who wanted to shoot me with their cameras like I was wild game.”

Mr. Middelhoff insisted that although he had to declare an oath before the bailiff in court on Friday, he is not in financial difficulties. When asked by DPA: “Are you broke?” he replied: “Categorically: No.” He insisted that his bank, Sal. Oppenheim, is blocking access to his funds. Mr. Middelhoff is awaiting a judgment this year that could release his money.

Under German law such an oath is given when a debtor has to outline his full assets. “One has to give a list of assets and assure that the list is complete,” said Stefano Buck, an insolvency expert with Schultze & Braun legal firm. “It is understandable that Mr. Middelhoff would not be that happy doing such a thing. It’s asking him to reveal everything he has or has not.”

 

Sal Oppenheim, the bank which keeps Thomas Middelhoff's time deposits, has frozen his assets totalling €30 million. Source: DAPD.
Sal Oppenheim, the bank which keeps Thomas Middelhoff's time deposits, has frozen his assets totalling €30 million. Source: DAPD.
Sal Oppenheim, the bank which keeps Thomas Middelhoff’s time deposits, has frozen his assets totalling €30 million. Source: DAPD.

 

For the moment it would seem that Mr. Middelhoff has some problems raising cash.

According to Spiegel magazine, the former top manager had lodged a complaint with a court in Bielefeld, in an attempt to avoid having to make the oath last Friday. However, Mr. Middelhoff was not able to produce a security of around €8 million ($10.7 million) that the court demanded.

Friday’s court hearing was required as part of the civil case brought by Mr. Berger, who is suing Mr. Middelhoff for €6.8 million.

The dispute centers on BLM Partners, an investment company set up by the two top managers along with Florian Lahnstein in 2008. Mr. Berger claims he raised €20 million on behalf of all three partners for an investment that did not pay off. He now wants Mr. Middelhoff to repay him his part of the deal.

Mr. Middelhoff is counter-suing Mr. Berger for a similar amount, saying that his former partner held onto shares instead of offloading them before they lost most of their value.

The idea behind their joint venture, BLM Partners, was to set up shell companies known as Special Purpose Acquisitions Companies (SPAC), which would first sell shares and then invest in attractive companies. The first such SPAC, Germany1, was an initial success, raising €250 million in a public offering. The three partners then invested a further €20 million in stock options.

However, the subsequent investment in AEG Power Solutions didn’t pay off. Shares in that company that were bought for €10 are now only worth 30 cent.

It’s not the only legal dispute in which Mr. Middelhoff is currently embroiled. His former asset manager Josef Esch says he owes him €2.5 million, while the insolvency trustees at his former company Arcandor have already won a case against him.

Last September a court ruled that Mr. Middelhoff owes the trustees €3.4 million. However, he is currently appealing that decision.

Arcandor, which had owned the Karstadt department store chain, filed for bankruptcy in 2009. The judge ruled that Mr. Middelhoff had received unjustified bonus payments.

In 2012 Arcandor’s insolvency administrator won a German ruling holding former Mr. Middelhoff and other former management board members liable for management failures.

According to Mr. Buck of Schultze & Braun, if Mr. Middelhoff were shown not to have adequate assets to pay his creditors, then a third party could force bankruptcy proceedings on him.

“An insolvency court would have to decide whether or not Mr. Middelhoff had enough assets, which I doubt is the case,” Mr. Buck said. “An insolvency administrator would then have to look in great detail at his financial circumstances. And he or she would have to examine whether over the past two to four years there had been any transfer of assets.”

Mr. Middelhoff is perhaps best known outside Germany for his tenure at Bertelsmann, where he served as chief executive from 1998 to 2002. As a senior executive in the 1990s he had been an early advocate of the importance of the Internet and encouraged Bertelsmann to buy what turned out to be a very lucrative stake in AOL.

 

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!