Another entry that has nothing to do with what I usually do but focuses on the Nurburgring again instead. If you followed the whole scandal surrounding the project at the Ring, then you will by now be familiar with the name Kai Richter, the..er…. ‘businessman’ who now runs the place – very much into the ground by the look of things. If you have no idea what I’m talking about, then please visit Save The Ring or the STR Facebook Page for more info.
The German Rhein Zeitung has just published a detailed report on new Nürburgring operator Kai Richter and the ring°card introduction at the Ring. Much of it evolves around a secret report by the National Audit Office that has been leaked to the media – the report is 50 pages long, so not sure if I can find the time to translate it all, but this article gives you all the most important bits.
The original article was of course in German, but below is an English version so more people can find out what’s going on and why Kai Richter must be send packing if there is to be any hope of the Nurburgring being kept alive as the world famous venue for petrolheads from all around the globe.
Bloggers, media peeps and anyone else: feel free to copy, link, share or do whatever you want with the below English version – the more people read it, the better! It’s not exactly a short article, so grab a coffee, light a cigarette and learn how Herr Richter lined his pockets at the Ring:
Ring Drama: The case of the CST – Kai Richter really cashed in at the Ring.
Rhineland-Palatinate: The story about the recent Nurburgring scandal is already filling volumes. There are stories of bounced cheques for millions of Euros and of exploding costs. Stories on how a finance minister had to resign and how a disgraced CEO was chased out of town.
But little has yet been known about a company with the complicated name “Cash Settlement & Ticketing GmbH” (CST). This company could be described as a kind of blind spot in the public eye.
That is about to change – thanks to a confidential draft of an audit report by the National Audit Office. The CST appears in it as a synonym for the waste of public money outside of any control.
In this explosive expertise something is taking shape that could be called the “Kai Richter System” – relating to the business man from Dusseldorf who has become known for a certain business instinct at the Eiffel race track: an instinct for contract structures that mean he is cashing in while the government is taking all the risks and providing the majority of the financing – to the disadvantage of the tax payer.
What led to this aberration? The original business idea seemed as simple as clever: the Nurburgring should be run cash-free. To do this, every visitor did – and still does – get a so-called “ringcard”, a prepaid card that can be topped up and acts as currency and entry ticket at the Nurburgring. Advantages for the Ring operators: No labour intensive cashier systems or having deal with small change every day: a sleek, automated system that also records visitor numbers.
Investment in ticket machines and required software would soon pay for itself, the ring-leaders thought in 2007. Especially since they were anticipating a huge number of visitors. The advantages for visitors to the Ring: virtually none. For operators of such non-cash payment systems often have ugly ulterior motives. They calculate that visitors won’t use up the whole balance on their cards and that any remaining amount will simply lapse. The Ring operators were brazenly building on this effect, as the secret draft of the audit report shows – but more on that later.
To be able to really cash in at the cash-free Ring, the afore mentioned Cash Settlement & Ticketing GmbH (CST) was founded on the 7 February 2008. Shareholders: To 50 percent the almost state-owned Nürburgring GmbH, to 50 percent the “Düsseldorf MI-Websolutions” and later the “MI-Beteiligungs-und Verwaltungs-GmbH (MI)”. Now the previously mentioned Kai Richter comes into play. The businessman from Dusseldorf who was already active in his role of “private investor” at the Ring. He owned 80% of the MI and served as managing director. Otherwise, only a man named Klaus Koenig was involved, about whom almost nothing is known.
So what is it that the National Audit Office is now criticizing? The analysis of the CST has about 50 pages, but only one message: In Rhineland-Palatinate, it seems worthwhile to do business with the state. Kai Richter fleeced the nearly state-owned Nürburgring GmbH for years and in the most incredible ways. All general rules of commerce went overboard. The canny investor used a network of companies around the CST in order to financially milk the cow called Nürburgring.
The preliminary report investigates the entire CST-complex, ending with the reorganization of the company that came to a preliminary conclusion in December 2010. The draft report has been in internal circulation at the state government for around four months. Allegedly, the final report has also already been issued. Contents: unknown. But the draft report alone is explosive enough. The Audit Office shows how unnecessary companies were founded and how services were bought in at vastly inflated prices. It were mostly Kai Richter and his business partner who went to benefit from this inflated structure. Especially during the era of Walter Kafitz and Ingolf Deubel strict cost control became a rarity. Deubel, hailed as a financial genius, served as Finance Minister of Rhineland-Palatinate until his resignation in July 2009, and also as chairman of the board of the Nürburgring GmbH. Walter Kafitz was chief executive at the Ring until his employment was teminated without notice in December 2009.
The report about the CST allows for the conclusion that – for whatever reason – the two main protagonists of the Nürburgring scandal left all security measures aside. Management plans were missing, a solid controlling wasn’t in place anyway, orders didn’t go out to tender as they should have, and estimates of visitor numbers were unfounded. An economical blind-flight without comparison.
The Supervisory Board of the Nürburgring GmbH, with the exception on Ingolf Deubel, appeared to have been sidelined and was badly informed. Consistent control? Not a chance. But what did the audit office criticize in particular? Here are a few striking examples:
No feasibility or viability studies: When the CST was founded, it was estimated that the whole cash-free payment system would cost up to 5 million Euros to put in place. Nevertheless, neither the technical feasibility nor the economic benefits were considered. So far, pre-paid systems like this one were mainly used in football stadiums – such as in Kaiserslautern, a venue that can not be compared with the Nurburgring. A costly birth defect: The Audit Office recommends to abolish the card system again. Even if things go well, the system will generate losses of up to 9.29 million Euros until 2014.
Business partners not checked: During the foundation of the CST, the Supervisory Board of the Nürburgring GmbH was only casually informed that not Richter’s well known company MediInvest would be the partner, but a completely unknown company called ‘MI-Websolution GmbH’. The financial statements of ‘MI-Websolution GmbH’ for 2005 and 2007 show cash reserves of less than 2000 Euros. Despite the Audit Office urging hard to choose co-partners carefully in previous reports , there was no verification of financial capacity or relevant skills at ‘MI-Websolution’. It shows how Richter could juggle at will with companies and shareholdings without anyone ever taking a closer look at him.
Cheaper alternatives were not considered: The Audit Office clearly states that the CST (with Richter as general manager) was totally unnecessary. Because a company called Payment Solution AG, an expert in non-cash systems, later took over the management of the CST. The Munich based company also offers complete solutions but there are no records that the supervisory board of the Nürburgring GmbH ever enquired about them.
Lack of information: Ring-CEO Kafitz did not inform the supervisory board of the Nürburgring GmbH that it had acquired the full funding of the nearly insolvent CST since April 2009. A clear breach of the founding resolution that required a 50:50 approval ratio. Up until September 2010 the Supervisory Board was barely informed about anything. An auditor commented on the general work of the board: “The board was basically satisfied with oral statements and did not take action on its own accord.”
Questionable business practices with remaining funds: In October 2009, one-and-a-half years after the CSt was founded, the supervisory board of the Nürburgring GmbH received a business plan for the first time, ie, a record of profitability. The plan did not only – highly unrealisticically – project that 1.5 million cards will be given out during every fiscal year, but it was also calculated that 40% of customers would forfeit a remaining balance of on average 2.75 euros per card – but visitors can claim back the amounts over a period of four years.
Chaotic reservations: Although Richter’s company Mediinvest was responsible for business acquisition, and received 54.000 Euros for this during 2009 alone, an additional accountant and another public accountant were hired by Richter himself in 2009. Unauthorized charges for this until September 2010: around 71 000 euros. In addition, the accounting was so chaotic that many transactions were posted twice. About 190.000 Euro were booked as “Gone Astray”, while just under 150.000 Euro were booked under “Incorrect Account”.
More waste: CST Managing Director Richter arranged vastly overpriced hourly rates for CST’s commercial administration (50 €) with Mediinvest, a company also owned by Richter. A similar case: Richter’s Mediinvest arranged an over-priced, long-term, and non-cancelable advertising contract with a company called “Jung Produktion GmbH” – a company on which Richter’s Mediinvest holds 50%. Volume of this contract: 150.000 Euros. “Jung Produktion GmbH” also earned a sizeable amount doing “project management” for two office-container plants, a service that was already included with the container company. Richter also channeled inflated rental incomes from warehouses to a comanpy called “Richter & Jung GbR”.
Irresponsible spending: Richter hired a company called “UBK GmbH”, an IT company, without putting the process out to tender and without task description. A blank cheque worth 290.000 €.
Also questionable: Two employees ran up phone bills totalling 13.000 Euros in just three months.
And even worse: The CST could have saved 720.000 Euros if the management had ordered only 500.000 payment cards in 2008, as recommended by Payment Solutions AG, instead of the 1.5 million cards that were ordered for use with the system. Only a fraction of the 1.5 million cards were actually used.
And finally: there were two directors at CST: Richter and a representative of the Nürburgring GmbH. Only one of them received 2,500 Euros per month. Who was that? Kai Richter, of course…
Two more articles about developments in the ongoing Nurburgring scandal, both from German newspaper Wirtschafts Woche (Business Week). They were both published yesterday and English versions can be found in PDF form below.
