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Minister jailed over Nürburgring

April 16, 2014

Ingolf Deubel has received a three-and-a-half-year jail sentence for his role in the failed plan to expand and partly privatize the Nürburgring. The circuit is now in private hands, after an insolvency-driven firesale.

Nürburgring in Rheinland-Pfalz
Image: picture-alliance/dpa

The former finance minister for the western German state of Rhineland-Palatinate, Ingolf Deubel, was found guilty on 14 counts in a Koblenz court on Wednesday. Judge Winfried Hetger ruled that Deubel had misled parliament over purportedly private loans for the renovation of the Nürburgring race circuit, loans that were underwritten by the state government.

Long-serving circuit CEO Walter Kafitz was also given a suspended sentence of 19 months in Koblenz on Wednesday.

Deubel was also found to have lied to a parliamentary inquiry, albeit not while under oath, seeking answers for the state government's failed "prestige project" of renovating the Nürburgring with private investment that never materialized. The failed attempt to expand the circuit - which was always government property - cost the state at least 330 million euros ($455 million). When the dust finally settled last month, the entire Nürburgring complex was sold to private company Capricorn, via administrators, for 77 million euros.

Kurt Beck und Ingolf Deubel
Deubel (right) resigned in 2009 as a result of the Nürburgring's opaque financesImage: picture-alliance/dpa

Deubel had pleaded not guilty since the trial's 2012 start, his lawyers had argued for exoneration.

Private loans, to be repaid by the government

The judge ruled that Deubel had knowingly endangered millions of tax euros, which he described as a "flagrant" breach of the finance minister's responsibilities. Deubel had simultaneously served as chairman of the supervisory board for the state-owned Nürburgring GmbH holding company.

With the help of private companies ISB and RIM, whose bosses from the time also received cautions as a part of Hetger's verdict on Wednesday, Deubel was found to have ushered public funds towards the circuit while outwardly claiming the money hailed from the private sector. Real estate business RIM nominally invested more than 85 million euros in the Nürburgring in multiple installments, money it in turn borrowed from investment bank ISB, which was underwritten by the government in Rhineland-Palatinate. This gave the appearance, as the judge put it, that the key investor Kai Richter "made the money available under his own power."

Insolvenz Nürburgring Betreiber Walter Kafitz
Former circuit boss Kafitz received a suspended sentenceImage: picture-alliance/dpa

Yet the judge ruled that Deubel, as state finance minister and Nürburgring board chairman, would have known that the Nürburgring leaseholder Richter - one of the brains behind the doomed revamp - would not be able to repay the money. The same applied to RIM and ISB, according to Hetger. As the Nürburgring floundered towards administration, it became clear that either massaged or even falsified market research data had been used to justify the business plan for the project.

Not responsible for insolvency

Deubel's trial pertained only to the time prior to his 2009 resignation, when he was under pressure in particular for his direct contact with a contentious potential investor in the project. The judge said he could not be held accountable for later developments. The grand public-private renovation categorically went belly up in the summer of 2012, when the Nürburgring holding company filed for insolvency.

The initial idea, put forward by circuit boss Kafitz and businessmen Richter and Jörg Lindner to the regional government then led by Kurt Beck, was to attract private investment by expanding the track into a leisure complex.

Insolvenz Nürburgring Betreiber Jörg Lindner Kai Richter
The business brains behind the failed venture: Jörg Lindner (left) and Kai RichterImage: picture-alliance/dpa

When no further investors appeared, and Richter and Lindner withdrew their funds, the government ultimately completed the project. But by turning the track into a leisure complex complete with hotel, casino, restaurants and a shopping promenade, EU anti-trust regulators began paying attention to the state-owned circuit's funding. Suddenly, subsidizing the track on the basis of helping local businesses became problematic in Brussels' eyes: the "new" Nürburgring was competing with local businesses, not supporting them.

The state premier at the time, Beck, blamed Brussels in state parliament when announcing the insolvency. Two months later, he announced that he would resign as state premier - a position he had held since 1994 - on health grounds.

With state funds cut off, the Nürburgring holding company ultimately filed for insolvency. Dusseldorf-based racing parts company Capricorn bought the entire complex for 77 million euros - or less than one-quarter of the money spent on renovating what was always state property.

msh/ng (AFP, dpa)