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Germans Draw Jail in Fraud Case

December 18, 2001

MANNHEIM, Germany (AP) _ Four former executives of a drilling equipment firm were convicted Tuesday in what is believed to be postwar Germany’s biggest corporate fraud case and sentenced to prison terms of up to 12 years.

A state court in Mannheim ruled the two men had cheated banks and leasing companies of 3.5 billion marks ($1.6 billion) with false business contracts while heading the FlowTex company in the southern state of Baden-Wuerttemberg until its collapse last year.

Former FlowTex bosses Manfred Schmider and Klaus Kleiser, the main defendants, diverted millions into their own pockets, each drawing monthly salaries of 100,000 marks ($46,000) to finance lives of luxury, Judge Michael Meyer said in reading the verdict.

The court sentenced Schmider to 12 years in prison and Kleiser to nine years, largely in line with prosecutors’ demands, after finding both guilty of aggravated fraud and other charges.

Both men were charged with defrauding more than 100 banks and leasing companies with fake business deals involving drilling systems for laying underground cables and pipes without tearing up roads.

Prosecutors said the company closed contracts for nearly 3,200 nonexistent drills while only 200 to 300 machines actually existed.

Kleiser and Schmieder were arrested Feb. 4, 2000 after nearly a decade of running FlowTex. Judge Meyer expressed surprise that banks and the company’s customers failed to catch on earlier.

``It is amazing to what degree and how long the system functioned,″ he said.

Also convicted in the case Tuesday were an ex-manager at a FlowTex unit, Angelika Neumann, who received a 7 1/2-year term, and the company’s former chief financial officer, Karl Schmitz, sentenced to 6 1/2 years.

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