Decision may mark beginning of the end for Steffi
DESPITE its image as an upper crust sport played by ladies and gentlemen and the occasional lovable rogue like Jimmy Connors or John McEnroe, professional tennis, to quote the game's premier US journalist Bud Collins, "was born in corruption and has never grown out of it". Nothing offers better evidence of this than Steffi Graf's complicated legal predicament.
For 15 months Steffi's father, Peter, and the Graf family tax adviser, Joachim Eckhardt, were jailed in Germany on charges of tax evasion. They were alleged to have set up off shore corporations, taken huge payments in cash and signed double contracts to conceal large sums of Steffi's income and evade taxes. For four years, 1989-93, Steffi filed no returns at all, didn't declare $27 million in income and didn't pay $13.5 million she owed in German taxes alone. Prosecutors have asked for a 6 1/2 year sentence for Peter Graf. Today, when the trial verdict is announced, he and Eckhardt will learn their fate.
Meanwhile, Steffi has remained free, continued to play - she's won four Grand Slam titles since her father's arrest and denies she knew anything about her finances, her failure to file tax returns or the millions of dollars in rule breaking guarantees she allegedly received. Refusing to testify at her father's trial on the grounds that that might incriminate her, she's kept the court proceedings at arm's length.
As a public relations ploy, this has worked in the cosy world of professional tennis. But as a legal strategy, it remains to be seen how effective Steffi's defence of innocence by reason of ignorance will be.
Steffi's legal problems are related to the rules of the Women's Tennis Association (WTA). In its Code of Conduct, the WTA insists "No player (or agent, coach, family member) shall accept money or anything of value that is given from any source, directly or indirectly, to influence or guarantee her appearance in any WTA Tour approved tournament".
But Graf allegedly received $300,000 from World Sports Marketing to play a tournament in Essen, Germany. She didn't play. WSM filed suit to get back its $300,000, and at that point German authorities noticed no taxes had been paid on the money. They raided Steffi's home, seized her financial records, and arrested her father and her tax adviser.
Among many eye popping pieces of information to emerge from the pre trial investigation, there is evidence that Steffi received almost $10 million in guarantees during her career. Each offence carries an automatic $50,000 fine, plus a penalty payment to the WTA of an amount equal to the guarantee. Additionally, the player is liable to a suspension of up to 90 days in each case - a punishment which, if it applied in Graf's case, would put her out of action for years.
Last week the WTA announced that Steffi is under investigation. Steffi says she's cooperating. Since the WTA has subpoena powers to obtain the financial records of players and tournaments, the question is why it took so long to investigate these allegations which are documented in the German prosecutor's files.
In Germany, Hubert Jobski, chief investigator in Peter Graf's trial, is on record as saying: "It has surfaced in the course of the investigations that certain organisations have paid appearance fees. They were officially declared as appearance fees". The last point is important. Although guarantees have long been one of the Women's Tour's worst kept secrets, the WTA has claimed players received the money in sponsorship or promotional deals, not guarantees. But with the cooperation of Eckhardt and Peter Graf. German prosecutors separated Steffi's income into specific categories - prize money, sponsorships and advertising, exhibition matches and antrittsgelder, or guarantees.
Documents indicate that the German Tennis Federation paid Steffi $150,000 to play WTA events in Berlin and Hamburg in 1991, $250,000 in 1992, 5270,000 in 1993. Gunter Sanders, head of the German federation, testified at Peter Graf's trial that these payments were necessary to assure Steffi's appearance.
The prosecutor's files also suggest that guarantees were paid to ensure Steffi's appearance for WTA tournaments in Canada, Japan, Switzerland and the US. None of this shocks tennis insiders. Gene Scott, former US Davis Cup team player, current publisher of Tennis Week and a tournament director of both men's and women's events, tells of being squeezed by the Grafs in the 80s. "Papa Graf comes into my office," Scott claims, "and says, `I didn't know the finals were on a Sunday. You know we're on our way to LA and Steffi can't possibly play in the finals.' He said, `she might be able to play if you make it worth our while.'"
Scott refused to pay off and declares that the WTA is "stonewalling" and trying to interpret Steffi's appearance fees as promotional deals. "It's baloney. When Steffi allegedly got paid $400,000 to go to Japan (for the Pan Pacific tournament) she did not perform services other than showing up."
However the guarantee matter is resolved, Steffi faces potentially more serious difficulties in the legal arena. Early in her father's trial, the family tax adviser, Joachim Eckhardt, testified that Steffi was knowledgeable, at least to an extent, about her father's system for evading taxes. Even if Steffi didn't know the details, ignorance is no defence under German law, and while nobody could expect her to keep track of every penny of her $100 million fortune, it's hard to understand how she didn't notice tax returns weren't filed for four years.
Circumstantial documentary evidence suggests she may have been more aware of her financial affairs than she has let on. In contracts she signed with her accountant and her attorney, she initiated clauses that obligated them to inform her of every financial decision made on her behalf. Failure to do so - is legally actionable. To date Steffi has publicly accused nobody on her payroll of dereliction of duty or profiting at her expense.
In the book Steffi. Graf Rich Girl, Poor Child, written by three German journalists for the news weekly Der Spiegel, there's a description of a deal with an Italian sponsor. While Steffi signed a contract for an amount that was announced to the press, Eckhardt was in the office with her, simultaneously signing a contract which called for a much larger payment. The object, according to the book, was to conceal income and evade taxes.
The book also maintains that in 1991 a meeting took place at the Graf house in Bruhl, Germany, and Steffi, her father, mother and brother sat quietly as Horst Schmidt, then her manager, explained how her money was being handled. Recently, on American television, one of the book's authors, Klaus Brinkbaumer, re emphasised that the source of this information is reliable. Brinkbaumer has also pointed out that neither Steffi nor any member of her family has threatened legal action against him, his fellow authors or their publisher.
After dealing with her father today, German authorities are expected to announce whether to pursue their investigation of Steffi and, more important, whether to prosecute her. Whatever they decide, the story is unlikely to have a quick or happy ending. German prosecutors announced that they are sharing information with the US Internal Revenue Service.
Since there's evidence Steffi received a $55,000 guarantee to ensure she would play the Family Cup tournament in Hilton Head and paid no US taxes, it's possible the IRS will take action. The same scenario might occur in Canada, Switzerland and Japan where Steffi was allegedly paid appearance fees. Sad and troubling as it seems, Steffi Graf, one of women's sports' brightest global stars, may have global legal problems for years to come.