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A similar thing happened with FlowTex [0]. FlowTex was founded in 1994 by Manfred "Big Manni" Schmider [1, second on the right] and Klaus Kleiser as a business
by lqet 4y ago
A similar thing happened with FlowTex [0]. FlowTex was founded in 1994 by Manfred "Big Manni" Schmider [1, second on the right] and Klaus Kleiser as a business for selling horizontal drilling machines. After a few years, they claimed to have sold over 3000 machines, each for 1.5 million marks. In reality, they had only sold around 270. They sold non-existing machines to leasing companies and immediately leased them back, without ever delivering the machines. This made it look like there was actually demand for these machines, which encouraged banks to give FlowTex more loans to buy (non-existing) machines. When the banks wanted to see the machines, they showed them a few in one hall and then served dinner. During dinner, they replaced the serial numbers on the machines, drove them to the next hall, showed them again to the bank representatives, created another disruption, replaced the serial numbers again, and so on. This went on for years.
When the scam collapsed in 2000, "Big Manni" was living in a palatial mansion on 15 acres of land [2], had houses in Cannes, Miami, Ibiza and St. Moritz, and owned a 55 meter yacht that previously belonged to the prince of Brunei. He had 2 private jets and a helicopter to fly him 10 km to work every day. In total, FlowTex had received over 4 billion DM (over 2 billion euros) of loans for buying fake machines. It quickly became clear that people in the ministry of finance and the tax office knew about the scam for years and did nothing to stop it. FlowTex paid taxes on the money "earned" from selling the fake machines to the leasing companies, politicians were proud to have such a successful company in their home state, and he was a large donor to the governing parties. I recall seeing a documentary once where it was hinted that even people inside the banks at least suspected it, but profited from provisions for giving out the loans and did not raise any alarms.
[0] https://en.wikipedia.org/wiki/FlowTex https://en.wikipedia.org/wiki/FlowTex
[1] https://www.bbheute.de/fileadmin/news/56352147.jpeg https://www.bbheute.de/fileadmin/news/56352147.jpeg
[2] https://www.durlach.org/data/media/35/flowtex2.jpg https://www.durlach.org/data/media/35/flowtex2.jpg
- sva_ 4y ago> 2 billion euros I think you meant DM here.
- lqet 4y agoNo, in DM the damage was actually way over 4 billion. I made it clearer above.
- sva_ 4y agoAh, fair enough. It is a little confusing taking the changing currency, and then potentially also inflation into account. Interesting story overall though.
- jsemrau 4y agoThe EURO was introduced on January 1st 1999
- sva_ 4y ago2002 for Germany mate.
- zinekeller 4y agoEuro as a currency and unit of accounting was introduced in 1999, including in Germany. Euro notes and coins were released in 2002.
- sva_ 4y agoI googled this, and it seems like you're right! I had the false memory (since I was a child at the time), that the DM-EUR exchange rate was determined when the EUR came out. But I still do vividly remember the number 1.95583, which was the exchange for DM:EUR. Kinda weird how they celebrated it, but I think Nutella burnt it into my brain :)
- rob74 4y agoTechnically you are right, but I would argue that the date when the Euro actually started to be used as a currency by people was much more significant than the introduction as an abstract financial term (especially considering that this "abstract Euro" was actually only another name for the ECU - https://en.wikipedia.org/wiki/European_Currency_Unit https://en.wikipedia.org/wiki/European_Currency_Unit - which had been in use since 1979, with initially 8 and then 12 currencies pegged to it).
- megablast 4y ago> politicians were proud to have such a successful company in their home state How would most politicians know?? They are going to do an audit. Why would they? Make the minister of finance might know, but you didn't say that. In both of these cases, it is just stupidity to blame the politicians when the experts were fooled.
- lqet 4y agoIt's not so clear-cut. Seeing the minister of finance, the minister president, and the former minister president being friendly with someone might certainly stop a low-level tax office servant from following his instinct and investigate further. Fear of public disgrace for a high-ranking party friend who repeatedly endorsed the company might certainly be enough for a politician to ignore any rumors, and not actively encourage further investigations.
- chii 4y agowhich is why separate watchdog organizations must exist to watch gov't departments. And the media must be free to publish things like scandals. the fear of public outrage will often prevent such things.
- red-iron-pine 4y ago> This made it look like there was actually demand for these machines, which encouraged banks to give FlowTex more loans to buy (non-existing) machines. When the banks wanted to see the machines, they showed them a few in one hall and then served dinner. During dinner, they replaced the serial numbers on the machines, drove them to the next hall, showed them again to the bank representatives, created another disruption, replaced the serial numbers again, and so on. This went on for years. I see sitcom potential here. Maybe an episode of Seinfeld: George, actually trying his hand at being a real importer/exporter for once, manages to stumble upon a similar idea, that of buying and renting drilling equipment, shipping it, etc. Of course then he overbooks and has to play elaborate games to hide the systems when customers come looking for it, etc. etc.