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The era of stupid German money available for filmmaking enterprises is truly over.

The decision by a Munich court to hand a six-year prison sentence for tax evasion to Andreas Schmid, the founder and former head of film fund V.I.P. ("The Punisher," "Lucky Number Slevin"), marked the end of a crazy era in which billions in private equity flowed from Germany to Hollywood and investors got taken to the cleaners.

Schmid and former partner Andreas Grosch, who received a two-year suspended sentence, also will be the center of an upcoming civil suit by V.I.P. investors.

Beyond that, the Schmid ruling could set off an avalanche of similar cases against other German funds that bent or broke the rules. A number of funds — Hannover Leasing, KG Allegemeine and LHI Leasing among them — had financial structures similar to V.I.P. Indeed, it is such structures that the courts have found to be potentially fraudulent.

Wolfhart Fabarius, chief editor of German investment newsletter Fondzeitung, believes the damages "could run to billions of euros" if all the cases come to court and fund investors win.

That is unlikely. Most fund managers were better than Schmid in hiding the money trail. Offshore accounts, favored by funds like Hannover Leasing (which backed the last two "Lord of the Rings" films), are outside the jurisdiction of most German courts.

But even if the funds get off, the days are gone when producers and studios could count on bags of German private equity to bankroll dubious projects.

Just as the collapse of the Neuer Markt sent German money running from media stocks, so the fall of the funds has soured investors' taste for all things film.

"Investors have been burnt and they aren't coming back," Fabarius says. "No one is going back to film as an investment, that's over and done with."

Instead, the German billions that helped feed the Hollywood machine for more than a decade have moved on to less sexy investment opportunities such as real estate or ship building. Of the dozens of film funds that sprung up during the boom, only one remains — David Gronewold's German Film Prods. And it invests solely in German-language productions.

At least the film fund party lasted a lot longer than anyone in Hollywood had a right to expect. But with Schmid's conviction, the party's definitely over. And the hangover of endless lawsuits has only just begun.

Scott Roxborough can be reached at sroxborough@yahoo.de.
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