Thomas Middelhoff, the broken tycoon, on life after prison

For a man who literally lost everything — his health, his wealth, his reputation and, for the better part of the past three years, his personal freedom — Thomas Middelhoff appears remarkably at ease with himself.

I get a taste of this even before we sit down. We realise we have both booked a table. I had asked the restaurant to seat us in a quiet area, as Middelhoff is a household name in Germany and I was keen to probe some quite personal matters. The table he booked is right by the main window in the central dining room. He suggests we take the latter. I reluctantly agree.

"I don’t feel ashamed any more," he later tells me. "Ninety-nine percent of the people in Germany know that I’m a convict."

Few businessmen have risen as high and fallen as precipitously as Middelhoff. He made his name at the German media group Bertelsmann, where as head of strategy in 1995 he struck an epic early digital deal with AOL, paying $50m for a 5% stake and launching a European joint venture.

In 2000, at the height of the dotcom boom, Bertelsmann sold its interests in the internet service provider for close to €7bn; Middelhoff, by then CEO, earned a bonus of €40m. Buoyed by this, he became the embodiment of a new generation of self-confident German business leaders — among them Jürgen Schrempp at Daimler and Rolf-Ernst Breuer at Deutsche Bank — doing megadeals in the US.

Then came the fall. In 2014, a criminal court in Essen found him guilty of misusing corporate funds at the German retailer Arcandor, which had collapsed in 2009 a few months after he left as CEO. He was sentenced to three years in jail, where he filed for personal insolvency. His picture-perfect family life — married for more than four decades, with five children — disintegrated. And he nearly died in jail after he developed an incurable, life-threatening autoimmune disease.

So you might expect to meet a broken man. Yet Middelhoff, who is 65, seems anything but. He arrives bang on time, cheerful and polite. "It’s so strange," he tells me more than an hour into lunch, "but internally I’m stronger than I was beforehand. I have the feeling that I’m in a really thrilling stage of my life."

He has a new partner, is writing a novel and has plans for another book. He is also campaigning for judicial reform. "My American friends also tell me: private equity, venture capital — you’re still good at this." But that, he says, is only an option once he finishes the books he has in mind.

He had suggested to meet at Klötzer’s Kleines Restaurant, a well-established, family-run place in Bielefeld, northwestern Germany. Middelhoff moved to the small, unpretentious city in 1989. It is close to Bertelsmann’s headquarters in Gütersloh, a sleepy town that is also home to the household-goods giant Miele.

Klötzer’s is located down a quiet side street in the centre of town. The menu is an eclectic mix of down-to-earth regional cooking as well as Asian and Mediterranean cuisine. Fines de claire oysters and Canadian lobsters are offered alongside kale with smoked sausage and Viennese schnitzel.

Is this one of his favourite places? "Well, I’ve eaten here maybe two or three times over the years," he replies. "It’s just that the choice of nice restaurants in Bielefeld is limited."

Middelhoff has visibly changed from the high-octane internet evangelist who was a frequent flyer on Concorde, known for his arrogance and ego. The most obvious difference is how haggard he is. He lost 20kg in jail, and has only recovered a few since his release shortly before Christmas.

He’s wearing a casual shirt, a beige cardigan and a pair of brown corduroy trousers. He dismisses the standard western managerial dress code — a dark suit, a pristine white shirt and an elegant tie — as a "suit of armour", consigned to the past.

He places a small pill box next to his cutlery. "I’m on 12 different drugs these days," he says. In jail, he developed the rare autoimmune disease chilblain lupus, which attacks the vital organs. Middelhoff claims the disease was caused by constant sleep deprivation during his first month in prison, when he was put on suicide watch.

He describes how wardens woke him up every 15 minutes at night to check if he was alive. This was disputed by the authorities but Middelhoff says the official prison record obtained by his lawyers includes detailed documentation of the nightly visits. Amnesty International later said that, if true, this was a violation of human rights, and Middelhoff says he intends to sue for damages.

The disease nearly killed him. A doctor confused the symptoms for a long time with foot fungus. Middelhoff shows me his hands. "Here you can still see it a bit," he says, pointing to faint red and blue patches on the skin of his fingertips.

He underwent two rounds of heart surgery, and tells me about it in more detail than I want to know at lunchtime. Currently, he says, he has problems with his kidneys. Every two to three weeks, he has to have a medical check-up. "If you look at it cynically you can say: my health is supervised so closely that any issue will be detected early on," he says, laughing. "You have to live with the disease and that’s what I do."

We have been so immersed in the conversation that, after 20 minutes or so, he has to remind me that we might want to have a look at the menu. Middelhoff is considering the Thai vegetable curry until I mention the schnitzel, which he recalls enjoying here on another occasion. He orders this and, after trying unsuccessfully to replace the accompanying potatoes with chips, gratefully accepts the truffled potato mash offered as an alternative by the waitress.

I go for fillet of locally hunted hare, which comes with nutty Swabian noodles and braised red cabbage. He says he doesn’t really need a starter, but changes his mind when I order a mixed salad. "OK, I will tag along, then." I suggest wine, and it doesn’t take much to sway him. He prefers white and I want red, so we order 250ml of each.

Middelhoff was sentenced for embezzlement and related tax fraud. One offence was making Arcandor pay the bulk of a costly birthday present for a longtime mentor. The other was to expense 27 private flights, among them helicopter lifts between his home and Arcandor’s headquarters 150km away, to avoid the notorious traffic jams on the motorway. The financial damage stands at about €500,000.

I ask him if he feels he was wrongfully convicted. His answer, to my surprise, is a clear "no".

"I don’t regard myself as a criminal in the legal sense but I do accept my sentence." He stresses that he never wanted to enrich himself. The key mistake, he says, was a disrespect for procedure, in particular his failure to get formal board approvals for the birthday present and the flights.

"I was out of touch with reality and thought that certain rules did not apply to me."

As our salads are served, the restaurant’s modern dining room is getting busier. Other guests obviously recognise Middelhoff, and I wonder if the diners at nearby tables are trying to listen in to our conversation.

This possibility does not stop his unforgiving reckoning with his former self. He cites the adage that "ability brings you to the top, character keeps you there". A key flaw in his character, he says, was vanity and a constant craving for public attention and affirmation. "That was a colossal mistake." He says that over the years he turned into a narcissist, and was carried away by hedonism.

I suggest that it is very difficult to change one’s character. Is the lesson that he should have stayed clear of any executive roles? He demurs. "I’m monitoring myself very closely today," he says. "Am I again trying to dominate a conversation? Am I again trying to show that I know something better?"

While he reflects on his character flaws, the waitress is collecting the empty salad bowls. Middelhoff says it took him months in prison to realise that for the past 25 years, he had lost his inner self. "I had turned into a guy that wasn’t me any more." He says he was holding everyone to high standards — apart from himself.

Realising this, he tells me, was a long and painful process. "Piece by piece, the whole concept of my life, my self-image, fell into tatters". A key moment, he says over a sip of Riesling, came during the admissions procedure when he found himself standing naked in front of a prison officer.

"That was appalling," he says. But over time, he adds, he began to wonder whether there were lessons to be learnt from the episode. "You cannot survive in such an environment if you constantly reject your situation and feel sorry for yourself."

Middelhoff says his faith helped him a lot. A Catholic all his life, he rediscovered religion in prison and describes his experience on returning to confession, when one of the priest’s remarks uncovered emotions and thoughts that had been buried for decades. After moving to an open prison, he chose to work for a charity for disabled people.

"I learnt a lot about humility and emotions," he says. It was a part of his life that had previously been closed off. "When I told Mr Mohn [the owner of Bertelsmann], that I sold our stake in AOL for €7bn, he said: great, here’s your bonus. But he never gave me a hug."

He then tells the story about a wheelchair user with brain damage. "When I went on a walk with him, he thanked me at least 10 times, and again and again shook my hand." Or the autistic person who barely said a word but told him: "Thomas, good man!": "This just touches my soul," says Middelhoff.

Our main course arrives. He is more excited about my hare than his schnitzel, which is huge. Unfortunately, I will soon discover that the rubbery hare fillet looks better than it tastes. The conversation turns to money and wealth. During his professional career, he made between €200m and €250m. It’s all lost, he says, calling German media speculation about wealth hidden abroad "utter nonsense".

The mansion in Saint Tropez and the luxury yacht anchored in Nice are both long sold. The millions in Bertelsmann bonuses and severance pay were frittered away by investing in dodgy real-estate funds. His Swiss-made Piaget watch was taken by a bailiff in court.

He claims he doesn’t care about the lost wealth. "Honestly," he says, "I was never keen to make loads of money."

I look at him in disbelief. How would he then explain his hard-nosed negotiations about bonuses?

"I’m not the kind of guy who you can motivate by money, never was," he insists. He claims that what drove him during his professional career was his reputation, a wish to be in the limelight. "These days, I realise to my own astonishment that I can live without all this fuss rather well."

As for his money, he says the grand plan was always to put the bulk of it into a charitable foundation after he retired. "I don’t have to bother about this any more," he says.

Middelhoff, I think not for the first time, is a man of contradictions. Take his claim that he doesn’t care about his reputation any more. When I mention in passing that his bestselling book about his time in jail received some mixed reviews, he embarks on a lengthy analysis of media reviews and readers’ feedback on Amazon.

"Within eight weeks, I had 40 reviews, and only one was truly negative," he says, adding that the book’s average rating was 4.7 out of 5. A few days after our meeting, his publisher calls me to make the same point.

Middelhoff is defeated by his schnitzel. We are both so full that we do not even mention the possibility of having dessert. He asks me if I want an espresso, orders two and then — well aware that the FT will pay for the lunch — asks the waitress for the bill. This is the Thomas Middelhoff who is used to running the show.

Our conversation turns back to Bielefeld. At the moment he is living in a different city in northern Germany, where his new partner is based. He’s only in town for the day, to take care of some family affairs. Does it make him feel sentimental to come back?

"Not at all." Despite living here for almost 30 years, he says he never felt really at home. He has written off the past. "I am thrilled about what is happening next."

As he was released after serving two-thirds of his jail term, he’ll be on probation until 2021 and has to meet his probation officer every quarter. Afterwards, there will be no further long-term legal consequences. His personal insolvency procedure will run for four more years. The remaining debt will then be cancelled, and he will receive his full Bertelsmann and Arcandor pensions. He will be 68. "On paper, I am not young any more. But interestingly enough, I don’t feel old at all."

One of his ideas is moving to London to work as a writer. He raves about the years he spent in the city from 2002 to 2005, when he worked for Investcorp, a private equity fund. "I had such a great time there, it was brilliant."

He recites an insight a rabbi told him when he lost his job at Bertelsmann: "When one door closes, another one opens." It may be a cliché, but it means a lot to Middelhoff. "You think: ‘This is the end!’ In fact this is just the opportunity for something new."

I leave both struck and slightly puzzled by the extent of Middelhoff’s transformation. His Zen approach is impressive. But I also catch myself wondering whether all that catharsis and self-criticism is just a little too perfect.

This article was originally published by The Financial Times.
Copyright The Financial Times 2018.