A Giant Jailed

It was dessert time at the banquet marking Chancellor Ludwig Erhard's ceremonial visit to the Hanover Fair. Suddenly a Nachtisch of grim-faced police appeared. To the astonishment of the crowd, they arrested and marched away Fritz-Aurel Goergen, the president of the vast Henschel Works, whose $125 million in annual sales cover locomotives, trucks and heavy machinery. Before the week was out, two other Henschel executives had been arrested, and four had had their homes and offices searched. Germany was faced with what may be its biggest postwar business scandal, which quickly began making bold headlines and even bolder rumors.

Suspicion of Fraud. Under German law, prosecutors need not immediately bring charges against arrested suspects, and the Koblenz prosecutors directing the Henschel case were tightlipped. Ruhr-born Goergen was simply confined to a Kassel jail on "suspicion of fraud against the German government." But in the German business community, the word spread that the charges involved faked invoices and old parts passed off as new in a $16 million defense contract awarded to the Henschel Works to provide spare parts for U.S.-built M-47 and M48 tanks used by the West German army.

German businessmen were particularly stunned by the stature of the company and the colleague involved. Tapped by occupation authorities after the war as apolitical enough to manage part of the old Thyssen steelworks, Goergen built Phoenix-Rheinrohr into the nation's second largest steel company before he and Widow Amelie Thyssen, his principal stockholder, split in a disagreement over policy. With the $600,000 settlement that he received after resigning, Goergen bought into Henschel, a once mighty steam-locomotive maker in Kassel that had sagged into receivership because it had underestimated the diesel locomotive.

Loss of Honor. Working twelve-hour days, short, blunt-mannered Fritz-Aurel rebuilt the giant, expanded into industrial machinery and helicopters, sold 44% of his stock to such U.S. investors as Morgan Guaranty Trust and Yale University when German bankers refused to finance further expansion. Goergen lived like the entrepreneur he was. His suburban Duesseldorf villa, ransacked by police for evidence, is filled with rich rugs, works of art and salons the size of tennis courts.

Germans found it hard to imagine that a magnate of Goergen's stripe could be involved in fraud, especially since defense contracts represent only 15% of Henschel's business. "It would hardly seem worthwhile for a company as large and important as Henschel to cheat for such a minor sum," said a Bonn corporate lawyer. Many Germans were jarred, too, by the blunt manner of Goergen's arrest and imprisonment, especially since no charge was filed against him. The uneasiness about how he was being treated was heightened last week when he suffered a heart attack in his cell and was transferred to the prison hospital.

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