Hoeness Day of Reckoning Takes Shine Off Bayern Munich

Uli Hoeness, the president of FC Bayern Munich, may face prison in a tax evasion case that has gripped Germany and tainted the image of the country’s most successful soccer club and its sponsors.

Prosecutor Achim von Engel asked the court to sentence Hoeness to five and a half years in prison during closing arguments in Munich today. Defense lawyer Hanns Feigen said that if the case isn’t dropped because Hoeness self-reported the violation, any prison sentence should be suspended.

Hoeness was initially charged by prosecutors with evading 3.5 million euros ($4.9 million) in taxes from trading profits booked through a secret account in Switzerland. That amount spiraled in three days of trial this week, when Hoeness admitted to avoiding 18.5 million euros. Tax investigators on the second day put the amount at 27.2 million euros, which his lawyers didn’t contest.

“It would be a tremendous miracle of legal history if the Munich court spares him prison time,” said Kai Hart-Hoenig, a criminal defense lawyer in Wiesbaden, who isn’t involved in the case. “We have some very strong mitigating factors here, no question about that. He’s a first time offender, he turned himself in, even if that effort seems to have been flawed. He has a record of public service. But even the biggest life achievements can hardly outweigh the heavy damage caused in this case.”

The verdict isn’t expected before 2 p.m., court spokeswoman Andrea Titz said on N24 TV.

“The judges will now deliberate and will reach a verdict based on all the information they heard during the trial,” she said.

Taints Club

The trial has taken the shine off a performance by Bayern Munich this season that is unrivaled in Germany’s Bundesliga with a 49th unbeaten league game against VfL Wolfsburg on March 8 that ended in a 6-1 victory for the Bavarian club.

Hoeness, who has resisted calls to step down from his post since details of his tax evasion came to light a year ago, went from the courtroom to the Allianz Arena, Bayern Munich’s home stadium, to cheer the team against Arsenal in a March 11 game that saw the German title-holders qualify for the last eight in the Champions League tournament it won last year.

The case also taints the club’s main sponsors, Adidas AG, Deutsche Telekom AG, Allianz SE and Audi AG, a unit of Volkswagen AG. The chief executive officers of four of the five companies, excluding Allianz, sit on Bayern Munich’s supervisory board.

Image Loss

Although the companies aren’t likely to be harmed financially, “the loss of image is considerable,” said Klaus Fleischer, a professor of finance at the University of Applied Sciences in Munich.

Allianz, Europe’s biggest insurer, on Feb. 12 said it would purchase an 8.33 percent stake in the soccer club for 110 million euros to equal holdings by Adidas and Audi, which are all based in the club’s home state of Bavaria.

Audi CEO Rupert Stadler declined to comment on Hoeness’s future at a March 11 press conference as “legal procedures are still ongoing.” A decision on the Bayern Munich president’s post can only be made once there’s a final judgment in the case, Stadler said.

Audi, based in Ingolstadt, has been the club’s official vehicle sponsor since 2002 and supplies corporate cars.

Adidas spokeswoman Katja Schreiber declined to comment. Deutsche Telekom, which two years ago extended its sponsorship of the club to the summer of 2017, couldn’t be reached for comment.

‘Profitable Relationship’

HVB Group, the German unit of UniCredit SpA, has been a sponsor of the club since 2003 and extended the contract until 2016. HVB doesn’t expect that it’s “very profitable relationship” with the club will suffer from the Hoeness case, CEO Theodor Weimer said at a press conference yesterday.

Allianz CEO Michael Diekmann said at the company’s annual press conference on Feb. 27 that he doesn’t see a need for them to distance itself from the soccer club and that everybody should be given the right to voluntarily disclose tax violations to avoid penalty.

“The compliance departments of the companies that have close ties to the club should have immediately taken action and put their commitment on hold or at least take a very neutral stance,” said Fleischer, the Munich professor. “That they didn’t care much is especially obvious for Allianz, which acquired a stake in FC Bayern long after the tax evasion issue became public knowledge.”

Management Team

Hoeness has been a member of the management of FC Bayern Munich since 1979. Before that, he spent almost nine years as a player, winning three league titles and European cups during the 1970s with the club. He was one of six Bayern Munich players, including Franz Beckenbauer, Gerd Mueller and Paul Breitner, who helped the German national team win the 1974 World Cup title against the Netherlands.

The probe into Hoeness’s tax obligations started a year ago when he reported himself to authorities after lawmakers rejected a treaty that would have stopped prosecutors from buying stolen Swiss bank data with details on German account holders.

With assistance from Alex Webb in Munich, Aaron Ricadela and Christoph Rauwald in Frankfurt, Kenneth Wong in Berlin.