Deceit Unearths Taxing Problem

Shakespeare, that keen observer of human nature, had it right when he pointed out that it’s a tangled web we weave when first we practice to deceive.

The web of his own design has ensnared Peter Graf through his complicated and, apparently, amateurish plan to hide millions of dollars of his daughter’s income.

Because of his tax-evasion trial, which began Sept. 5 in Germany, much that had been concealed is now revealed. The entire affair has become a morality play with all-too-human characters with all-too-familiar vices, chief among them, greed.

Just as Peter Graf’s ambition outstripped his abilities as a financial advisor, the trial’s revelations have gone beyond expectations and have ensnared not just Steffi Graf, but also have raised questions about what may be business as usual on the WTA Tour--the banned practice of appearance fees.

For more than a year, Steffi Graf’s financial dirty laundry has been hanging in public. Now her father and tax advisor Joachim Eckhardt are being tried on charges that, between 1989 and 1993, they failed to declare $28 million in Steffi Graf’s income, thereby defrauding the German government of $13 million in taxes.

The prosecution claims that Peter Graf and Eckhardt set up dummy companies to funnel cash to offshore tax havens. Eckhardt allegedly told prosecutors that not only was Peter Graf in over his head, trying to juggle all the cash transactions, but that Steffi was aware of what was going on. She has denied any knowledge of any impropriety regarding her taxes.

She has still not been fully cleared and the investigation continues. The web reaches others too. Peter Graf has testified that German politicians agreed to let Steffi forgo paying taxes in return for her continued residence in the country. Many tennis player claim tax-free Monaco as their country of residence.

Tennis officials in Germany too, seem to have been accomplices, eager to display a national treasure such as Graf, and benefit from it. The German news magazine Der Spiegel said last week that Graf was paid more than $1.7 million in appearance fees by the German Tennis Federation over four years, merely for playing in German tournaments. That figure does not include endorsements or prize money.

The magazine also claims Peter Graf negotiated appearance fees from tournaments in Japan, Switzerland, Canada and the United States. Graf is said to have demanded cash payments for appearance fees and, in some instances, from sponsors.

At least some of the allegations have been substantiated during the trial. The general secretary of the German Tennis Federation admitted on the stand that Peter Graf was paid as much as $270,000 a year to ensure that his daughter played in tournaments in Germany.

That practice is banned on the WTA Tour, which specifies a fine of $50,000 and a suspension of up to three months for any player who, even indirectly, accepts money or anything of value as an inducement to play in a tournament.

Der Spiegel said the German prosecutor also has documents showing that Monica Seles and other top women players are regularly paid appearance fees, suggesting that Graf and Seles can demand up to $300,000 at some tournaments.

A statement released by the WTA said there is no evidence of appearance money having been paid to any tour player. Yet the paying of appearance fees is an open secret in women’s tennis. The practice is allowed on the men’s tour and leads to some hilarious second-round “injuries” by top players who are happy to take the up-front money and run after a few days.

There is at least one other undisputed incident involving appearance payments to Graf. According to a lawsuit brought by promoter Ion Tiriac, in 1994 Peter Graf negotiated a $300,000 guarantee for Steffi to play in a tournament in Essen, Germany. Tiriac said he paid the money, but Graf pulled out of the event. Tiriac sued Peter Graf to recover the money.

It all ties together: That lawsuit is a key point in the Grafs’ legal timeline. Tiriac’s suit was the whistle-blowing event that alerted German tax authorities to Graf’s potential undeclared income and got the whole thing started.

What makes the Tiriac scenario so interesting is the wily former player’s rumored role as takeover artist this season. He has, the story goes, been angling to usurp Advantage International and nab Graf’s lucrative management contract.

But Phil de Picciotto, Graf’s agent since 1987, said he and Graf renegotiated their contract at the U.S. Open and Tiriac is out of the picture.

He said the new contract specifies that Peter Graf has no financial control over his daughter’s affairs and that Hans Engert, a former hitting partner, will manage Steffi Graf’s German business dealings.

The trial is likely to go on for months. Expect a few more revelations before it’s over: It’s a tangled web and many are going to be caught in it.