German State Absolved in Flowtex Case

The failure of the German state of Baden-Wuerttemberg's tax authorities to uncover fraud during audits of Flowtex Technologies GmbH in 1996 and 1997 did not make the state government liable, the regional court in Karlsruhe ruled on Tuesday. The ruling absolves Baden-Württemberg from a 1.1 billion-euro ($1.3 billion) claim for not discovering that Flowtex faked the existence of drilling machines. In 2003, Flowtex Chief Executive Manfred Schmider was found guilty of fraud for selling more than 3,000 drilling systems to leasing companies, while only as many as 300 existed, causing 1.8 billion euros of damage. He was also convicted of providing false information in connection with bank loans and a 300 million-euro bond sale to enrich himself.