“GUILTY” IS THE title of a book presented on August 20th by Thomas Middelhoff, the former boss of Bertelsmann, a media conglomerate, once feted from Berlin to Hollywood. It is not an admission of legal guilt, for Mr Middelhoff still feels his three-year prison sentence for tax evasion and breach of trust was overly harsh. But he committed the seven deadly sins in a biblical sense, he says, which is why he feels he deserved time behind bars and the loss of his fortune, reputation, health and marriage. He wants the account of his failures to serve as a cautionary tale for businesspeople in Germany and beyond.
Mr Middelhoff’s stellar rise was unusual in staid Teutonic business culture. He climbed to the top of Bertelsmann through a combination of hard work, unwavering belief in his instincts, showmanship and an Anglo-Saxon appetite for risk. Perhaps his biggest coup was a partnership with Steve Case, who at the time was the virtually unknown boss of a struggling startup called America Online. Then known as “Big T”, Mr Middelhoff made a fortune for Bertelsmann when he sold its stake in AOL for close to €7bn ($6.7bn) in 2000, just before the dotcom bubble burst.
His reward—a bonus of €45m—was the start of the undoing of his personal finances. Greed, he says, led him to invest in dodgy real-estate funds and tax-avoidance schemes. In 2002 he was forced out of Bertelsmann after clashing with the Mohn family, who own the company, over his plans to take the firm public. Eager for a second act as a German business tycoon, in 2005 he took the helm of KarstadtQuelle, which later became Arcandor, then Germany’s biggest retailer. His efforts to turn around that ailing company led to his humiliating decline. He sold Arcandor’s property portfolio for €4.5bn but saddled its department stores with high rents. In February 2009 it was the Arcandor board’s turn to force him out. By June the retailer had collapsed.
That is when prosecutors began investigating Mr Middelhoff’s conduct at the company. They uncovered his use of Arcandor aircraft for private purposes and company cash to part-finance a book honouring his mentor at Bertelsmann. In 2014 a court in Essen found him guilty. He was arrested in the courtroom in front of his family. A year later he declared personal bankruptcy.
Mr Middelhoff’s tale of hubris resonated beyond the corporate world. He served as the model of the title character in “Johann Holtrop”, a novel by Rainald Goetz. At the end of the novel Holtrop commits suicide. “For Germans there is no rise after the fall,” says Mr Middelhoff.
The repentant mogul has already published one book in 2017 about his time in the nick and his autoimmune disease. Jarringly, he prefaced several chapters with quotes from Dietrich Bonhoeffer, a pastor imprisoned and executed by the Nazis, seemingly equating their respective fates. He is now working on his third book, a novel about the rise and fall of a business tycoon. Mr Middelhoff may be humbled. But his favourite topic is still Mr Middelhoff. ■
This post was originally posted at https://www.economist.com/business/2019/08/24/thomas-middelhoff-reflects-on-failure-in-german-business.