Stradivarius dealer admits embezzlement as trial begins

VIENNA Wed Sep 19, 2012 5:04pm BST

Defendant German businessman Dietmar Machold, wearing handcuffs, awaits the start of his trial for fraud and embezzlement at a court in Vienna September 19, 2012. REUTERS/Heinz-Peter Bader

Defendant German businessman Dietmar Machold, wearing handcuffs, awaits the start of his trial for fraud and embezzlement at a court in Vienna September 19, 2012.

Credit: Reuters/Heinz-Peter Bader

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VIENNA (Reuters) - One of the world's top dealers in precious Stradivarius violins admitted he embezzled money made from the sale of instruments entrusted to him by his customers, but denied fraud charges as his trial got under way in Vienna on Wednesday.

Dietmar Machold, a 62-year-old German, was once the world's most influential dealer in instruments crafted by 18th century masters like Antonio Stradivari, whose workshop in Cremona, Italy produced some of the finest violins and cellos ever made.

A high-society fixture, Machold lived in an Austrian castle, had a fleet of expensive cars and collected watches and cameras. His global network of rare instrument dealerships let him move with ease in the highest circles of music, fame and money.

But his empire collapsed in 2010, triggering claims against him worth tens of millions of dollars from creditors and clients who say they were bilked.

The trial is scheduled to last three days. Machold faces up to 10 years in jail.

Prosecutor Herbert Harammer traced the career of the fifth-generation violin expert who built his Bremen-based family business into an empire with branches in Zurich, Vienna, New York and Chicago to serve elite musicians and collectors.

"This ascent was built on sand," Harammer told the court, accusing Machold of leading a lifestyle that was a facade for a business that had actually been insolvent since mid-2006.

Dressed in a dark suit and red print tie and led to the court in handcuffs from the detention center where he has been held for months, Machold was calm and composed as the charges were read out, variously looking at the floor or ceiling.

He denied charges of fraud, but acknowledged diverting five rare instruments entrusted to him for sale by clients, including a Stradivarius violin from 1727, that court documents valued at around 2.6 million euros ($3.4 million).

"All these (instruments) were used illegally. I confess fully," Machold told the court, saying he was in desperate need of money after losing a lawsuit brought by a construction company which meant his Eichbuechl castle was at risk.

Machold is also accused of hiding assets - including a camera collection worth 200,000 euros - from creditors.

He told the court he was now saddled with "gigantic" debts that he put at around 250 million euros.

The high-profile dealer at times gave contradictory testimony, at one stage saying he built personal relationships with the instruments in his care.

"These were my children," he told the judge.

But later he said he "simply forgot" one expensive violin that he failed to report to administrators.

Machold rejected allegations that he had abused his reputation to misvalue instruments, such as a cello he said was worth $300,000 but which the prosecutor said could be bought on Ebay for $2,000 or less.

Machold, who regaled the court with stories of parties at his castle and lending precious instruments to rising star musicians, dismissed the court-appointed expert's valuation.

"This man's name is not known outside of Austria," he sniffed. "In all modesty, mine is."

(Reporting by Michael Shields, editing by Paul Casciato)

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