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16th of July 2018

Economy



From high-flyers to jailbirds: chief execs who fell foul of the law | IOL Business Report

Audi’s chief executive, Rupert Stadler.Photo: BloombergINTERNATIONAL - One moment you’re the globe-trotting head of a corporation with an army of subordinates to execute your every order, the next you’re behind bars and required to file requests for items as banal as toilet paper.

While jailing executives, particularly those of global companies, is an almost unheard of occurrence in Germany, that’s just what happened to Audi chief executive Rupert Stadler last month. One of the few other corporate leaders to suffer a similar fate was Thomas Middelhoff, and he has some words of advice to adapt to the circumstances.

“You need humility, otherwise you’ll crack,” said Middelhoff, who led media company Bertelsmann AG and retailer Arcandor AG. “It’s a process: the first reaction is inner revolt. Then there’s a combat phase, then the breakdown. Only after that do you start becoming yourself again.”

Middelhoff went from chief executive with a rock-star allure and jet-set lifestyle to a convict who served a total of two years for misappropriating 500000 (R8million) in corporate funds for helicopter and private-jet trips, charges that he denied. It was a startling decline for one of the country’s best-known managers, who rode the corporate rocket to the very top, including private jets, yachts moored in Saint-Tropez and regular board meetings in New York.

His life took a dramatic turn in 2014, when Middelhoff was whisked straight out of court and transferred into a sparse prison cell the day he was convicted. He was detained even though he planned to appeal, as the judges suspected he would flee. He spent five months in preliminary detention, and “when the door shut for the first time, it was a feeling as if the air had been drawn from my lungs,” he said. “My head was spinning.”

For managers used to guiding other people, being under seamless scrutiny is hard to comprehend, Middelhoff said. For each item he needed, Middelhoff had to file a written request; cellphones and computers weren’t permitted at all.

Meetings with lawyers meant body searches before and after each encounter, family visits were restricted to twice a month - and only for three people, a tough situation for Middelhoff, who has five children.

“When my wife came to see me for the first time, I wept,” Middelhoff said.

He’s since documented his experience in prison in a book he began working on in jail, where he starting the day at 5am reading the Bible, followed by a work-out regime that included 100 push-ups.

Middelhoff spent his preliminary detention segregated from other prisoners to protect him from possible attacks. After five months, he was released on bail. When his appeal was rejected, he served the rest of his sentence working outside prison walls at a charity.

Not much is known of Stadler’s daily routine behind bars, near the Bavarian city of Augsburg, where he was taken after his arrest on June 18.

Prisoners can ask to wear their own clothing and have access to TV and the prison library. They can request a separate cell, though most prefer to stay with other inmates to avoid isolation. Germany’s Bild Zeitung posted stock photos of a cell, complete with the daily menu, a sparse fare of potato salad and meatballs, or schnitzel with pasta.

Stadler’s attorney Thilo Pfordte didn’t immediately return a call seeking comment.

A Volkswagen veteran who ascended to the top of Audi in an almost three-decade career, Stadler held on to his job in the last three years even as accusations of his company’s involvement in the diesel-rigging scandal grew.

While Stadler hasn’t been charged, he was detained because of suspicions of evidence tampering. He is suspected of fraud and falsifying public documents in connection with the three-year diesel-cheating scandal that’s rocked Volks- wagen since 2015, and prosecutors will continue to question the executive this week.

- BLOOMBERG 

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