All fall down

In grey northern Europe, there is something about an immaculate, 365-day-a-year tan that suggests success. Jurgen Schneider had such a tan, rich, almost unctuous, and perfectly set off by his gold-rimmed spectacles. He also had a Porsche, a palatial villa, and a Lear private jet. In little more than a decade, Schneider had built the most opulent and admired property empire in Germany. The Germans have a word for this sort of person - a macher, a doer. They led Germany out of the rubble of defeat and transformed it into Europe's greatest economy. But Jurgen Schneider, property developer extraordinaire, was more than most doers - he added style and panache. His buildings were widely admired. Feted by politicians, cultivated by bankers, hailed in the press as Germany's "Construction King", Schneider was a local hero in cities like Frankfurt and Leipzig.

But the tan is now rapidly fading on detainee 43939/004. Jurgen Schneider sits with his wife Claudia in Miami's Federal Detention Center, awaiting extradition proceedings. The sound of falling masonry still echoes from last year's property empire collapse, the most spectacular in Germany's post-War history. The doer had become deceiver and destroyer, shocking a nation that believed such calamities had no place in its secure, ordered world. Jurgen Schneider's name leapt from the gilded roll of esteemed business leaders to the top few on Germany's list of most-wanted fugitives.

As disguises go, Schneider's had been pretty rudimentary. All he did when he slipped from Germany at Easter last year was remove his infamously errant toupee and grow a restrained salt-and-pepper moustache. But it was enough to keep the world guessing for 13 months. Interpol scoured the sands and seas of the Persian Gulf, the high plains of South America and the low cities of Asia. And all the time, the 61-year-old Schneider was living with Claudia in a place so banal that nobody noticed. They had faded into the twilight zone of Miami's pensioners, inside the featureless concrete canyons where people pay little heed to one another. That is, until the evening of Thursday, 18 May, when an FBI agent, towing behind him a colleague from Germany's Federal Criminal Office, leant into the window of a rented Nissan parked outside a branch of Capital Bank in downtown Miami. There were groceries and a few bottles of spirits on the back seat. "Are you Jurgen Schneider?" asked the agent. The grilled pate, unused to so much exposure to the elements, crinkled. "Yes," came the response.

There is little doubting the widespread satisfaction in Germany at the sight of the prison photograph of detainee 43939/004. Jurgen Schneider had humiliated Germany's banking establishment. By the time he did a bunk, he owed 6 billion marks (pounds 2.7 billion) to 50 banks. But that was not the cause for public outrage. Like people everywhere, ordinary Germans derived a certain satisfaction from seeing the mighty banks humbled. But Schneider had let down these ordinary people. Thousands of small businesses and tradesmen were financially devastated by his deceit. Worse still, Schneider had shattered a dream. Immaculately tailored, charming, wealthy and enthusiastic, Schneider personified the extravagant hopes and promises of unification. He built only the finest; he was a master of transformation. For east Germans, confused and worried by the tumultuous changes and uncertainties in their lives, Jurgen Schneider seemed just the sort of western capitalist they could understand. For here was a man who was going to turn the crumbling hulks of Communist neglect into city centres, whose flamboyance would rival the best in the west.

Schneider was most acquisitive in Leipzig, fast becoming the city's financial powerhouse. He bought up virtually the entire centre, including the prestigious Madler Passage, where Goethe's Faust watched Mephistopheles perform hocus- pocus upon the drunken student clientele of Auerbach's Keller. The plans were characteristically luxurious - with attention to immaculate detail, the use of the finest products, providing a setting for prestige shops. As news spread of Schneider's flight, tradesmen invaded the building sites, tearing off doors and window frames, seeking to salvage something from the calamity. "There is more at stake here than money and jobs," said Hinrich Lehmann-Grube, the mayor of Leipzig. "It is a matter of trust in our economic system."

Jurgen Schneider had trained first as a bricklayer and then as a construction engineer in his father's building business - a typically thorough Teutonic grounding. Frustrated by his job as an on-site contracts manager, he identified a gap in the market for developing historic buildings. But his overbearing father showed no interest. For understandable reasons, the post-War German experience had been to rebuild the country in a rush, to put the place back together again. Few paid attention to historic buildings in this drive to create the workmanlike and rather dull centres that now typify most of the big cities. But the popular belief that everything in Germany had been flattened by Allied bombs was exaggerated. Many historic buildings were still standing, and Schneider nurtured the ambition to transform some of them into jewels, where traditional structures, elegantly restored, would house the latest amenities. His marriage to Claudia, the heiress to an electrical goods group, brought him the money he needed, and in 1981 they set up their own company.

The Schneider group eventually amassed a five-star portfolio containing 80 properties in 14 cities, all lavishly developed in the finest settings. There were some new buildings, but Schneider specialised in transforming the old, such as the Hotel Rose, in his home town of Wiesbaden, which he aimed to turn into Europe's finest by ripping out the 220 rooms and replacing them with 77 individually decorated suites. The Bernheimer Palais in Munich represented Schneider's vision of an exclusive shopping complex. To reach the desired clientele, the rich whose villas adorn the shores of the Starnberger lake 20 miles to the south, Schneider had plans for a shuttle service by Rolls Royce, with fresh roses for the passengers.

Jurgen and Claudia Schneider understood the importance of appearances. They lived in a late-19th-century folly, the Villa Andreae, which he had restored and which was also his corporate headquarters. Complete with fairytale turrets, gilded spikes on the railings surrounding the property, and a nuclear bunker in the cellar, this pompous establishment commanded a beautiful view from its position in the wealthy town of Konigstein, perched in the Taunus hills to the north of Frankfurt. Schneider hated staying away from home, and rarely moved far without his two bodyguards.

The banks loved him, despite all the ostentation. In the end, Schneider went bust not because the banks lent him too little, as he claimed, but because they lent him too much. Schneider was an autocrat; he signed all the cheques himself. And he was a notorious chiseller - his contracts were infamous, containing clauses that enabled him to reduce payments for errors or deadlines missed. "Every fault was logged and later held against you when it came to paying," said an international architect who worked on several Schneider projects. Schneider's own on-site management group, Technoteam, who earned bonuses if they reduced a contractor's account, were known in the business as Terrorteam. Schneider boasted to his banks that he could complete projects at ten per cent less than his rivals. The Frankfurt courts were littered with cases brought against him by aggrieved contractors. Locally, he found it increasingly hard to hire people. But they kept coming from elsewhere, even abroad, drawn by the fabulous projects and the fact that sometimes he paid very well.

Schneider maintained 580 million marks (pounds 260 million) in cash on deposit at his banks, the trump card he used to prove his financial solidity when asking for yet another loan. But behind this facade, he was trying to defy the property developer's law of gravity. He bought, but he did not sell. He amassed buildings like antiques, spending lavishly on restoration and then renting them out. He would then use each newly completed project as collateral to borrow for the next. Schneider was turning an ever-growing wheel of debts and properties. Since the early Nineties, however, property values in Germany had been sagging. Recession was in the air. The sums no longer stacked up. Just to keep going, Schneider had to keep borrowing. Turning the wheel was demanding ever more energy and ingenuity.

So, on doctors' orders, he took a break. On the Thursday after Easter last year, an extraordinary letter landed on the desk of Ulrich Weiss, a member of Deutsche Bank's board. In it, Schneider explained that his doctors had told him to relinquish all business responsibilities on health grounds. He complained that the banks were squeezing him, asked Deutsche for a bridging loan to cover a temporary cash-flow problem, and suggested it might run the group's affairs during his absence. Regrettably, he explained - again on medical advice - he could not reveal his whereabouts. Deutsche Bank was the tycoon's largest creditor, owed 1.2 billion marks (pounds 540 million). The biggest bank in Europe, it bestrides Germany with awesome power and prestige. Suddenly, the suspicions that had lingered on the executive floors of its twin crystal towers in Frankfurt turned into alarm. The bank had arranged a meeting with Schneider for later that April to discuss his debts. Credit-risk specialists sped to Villa Andreae where, through the weekend, they did what Deutsche Bank had failed to do for too long - went through Schneider's books.

This revealed all manner of horrors. Schneider was claiming far more rentable space in buildings than existed, and higher rents than he was earning. Most galling of all for Deutsche Bank was the stylish Les Facettes shopping complex in central Frankfurt, a stone's throw from the bank's headquarters. It had only 9,000 square metres of rented space, not the 20,000 Schneider had claimed to secure his loan. The rent was six times lower than he claimed. Deutsche had lent 450 million marks (pounds 200 million) for the project, not bothering to burden their client with the checks it routinely imposes on someone seeking a mortgage for a two-bedroom flat. Against the 6billion marks (pounds 2.7billion) of loans outstanding, which the banks had believed were meticulously covered, Schneider's properties might be worth 3.5 billion marks (pounds 1.6 billion). Germany's proudest property empire imploded into bankruptcy.

The wave of public scorn and outrage took the banks utterly by surprise. These were troubled times in Germany - recession still gripped the country, unemployment was rising strongly. In one opinion poll taken at the height of public emotion shortly after the Schneider empire collapsed, 72 per cent of respondents blamed the banks rather than the fugitive tycoon for the calamity. In the east, the backlash against the glib western promises of unification was gaining strength. The banks were devastated, the victims of something that was not supposed to happen in Germany. Property collapses were regarded as a peculiarly Anglo-Saxon affliction, symptomatic of inflationary economies, ill-considered lending and boom and bust. This was totally foreign to an environment carefully constructed on solid pillars of security and long-term protective relationships. The spectacular tribulations of Donald Trump, or the Canadian Reichmann brothers of Canary Wharf notoriety, had provoked knowing nods in Germany. Indeed, in early 1994, property experts and bankers were boasting how the worst period of the recession appeared to have been weathered without major trauma.

There had, of course, been rumours of trouble in Schneider's empire. A few banks had even stopped giving him new loans in the early Nineties. But all 50 creditor banks still felt safe. After all, the loans were well secured, and Schneider had always met his payments on time. Anyway, Germany's opaque accounting system meant the banks had little choice but to rely heavily on the word of their esteemed client.

But this was the problem. For the banks were seen as having failed in their most basic responsibilities, blinded by double standards. "The banks are criminally neglecting their supervisory duties, and are foolishly giving undeserved preferential treatment to major customers," thundered Klaus Bregger, the head of a small- and medium-sized business association. The banks railed against Schneider's "criminal energy", protesting that they had been the victims of massive deception. But as they twisted and turned on the knife of public outrage, they had little choice but to intone a highly uncharacteristic mea culpa, led by Hilmar Kopper, the chief executive of Deutsche Bank and high priest of German finance. "The most grave mistake is that we allowed ourselves to be deceived," he said. "It hurts our pride, of course. But even star pupils are caught out by not doing their homework properly." The hurt was less in the money, relatively easily made up for by the banks' mighty balance sheets, than in the damage to self-esteem. In due course, Deutsche fired four middle-ranking executives who had handled Schneider loans. But the rebuilding of public confidence would take longer. In their rage, the banks, with Deutsche to the fore, launched the international manhunt.

Schneider's flight had been meticulously planned. For several months, 250 million marks (pounds 112 million) had gradually been siphoned from the group's ostentatious cash deposit and sent out of the country. On Maundy Thursday, Schneider told his closest associates at Villa Andreae that he and Claudia were off to Tuscany for a short break. Instead, the couple flew to Geneva, and then Washington, where they vanished. As Germany's Federal Criminal Agency, aided by Interpol, floundered around, the world's press allowed chequebooks and imaginations free rein. The indomitable Bild, Germany's equivalent of the Sun, displayed colour photographs of Schneider's hideaway villa in the mountains above Isfahan, where he was said to be a guest of Iran's mullahs. The Times of India found Schneider languishing in a Calcutta hospital. The South China Morning Post tracked him down in Hong Kong. The Mourne Observer identified the fugitive in Northern Ireland. Even the attentions of the National Enquirer strayed long enough from traditional encounters with Martians in Idaho to discover the Schneiders on a deserted ranch in Tierra del Fuego. Perhaps he was on a never-ending cruise in the Gulf, or even dead, the victim of drug barons, the mafia, Arab gun-runners...

In fact, the Schneiders were lounging by the pool, day in, day out, at Alexander Towers on South Ocean Drive in Hallandale. When police later questioned residents about their suddenly notorious neighbours, few could even remember the Schneiders. Among the staff, they were just known as "lousy tippers". Passing themselves off as Italians, it is not surprising the couple avoided conversation. His English was patchy, hers non-existent. The couple chose Miami because Mostafa El Kastaui, an Egyptian-born business associate of Schneider's, was well connected there. The police eventually uncovered this link, and from there, took note of the frequent flights between Geneva and Miami of El Kastaui's assistant, Luigi Poletti. Shadowing Poletti, the agents finally found their man. He offered no resistance. A short while later, Claudia was taken in handcuffs from their flat.

The heavy clouds of recession have moved on beyond the German horizon, the economy is doing rather well again. Even the anger at the breaking of all those rash promises made during the heady days of unification is easing, as eastern Germany grows rapidly thanks to the large western subsidies. But the anguish of big property collapses tends to linger on in people's minds, long after other unpleasant memories have faded. The Hotel Rose still stands as an empty shell, while creditor banks think desperately of ways of making Schneider's crazy sums, and dreams, add up. Other projects are being gradually finished off. But the banks will never get all their money back. They were scorched by the passions of detainee 43939/004, now awaiting extradition to Germany, and a possible 15 years in jail. Each night, the spotlights still burn around Villa Andreae. The banks are paying to keep this monument to Schneider's folly, and indeed their own, ablaze in the darkness