The 46-year-old mother of three eventually turned to German and Italian police for help. The gigolo, Helg Sgarbi, and accomplice Ernano Barretta were arrested during the summer. However, news and details of the plot were only first reported in the British and Italian press on Friday.
Klatten, who is worth an estimated €10 billion, began her affair with Sgarbi in 2006. The two met for trysts in Monte Carlo. Barretta allegedly made secret films of their encounters. Not long after the affair began, Sgarbi began telling Klatten that he needed money to pay protection money to the American mafia.
Klatten, who also owns a 50 percent stake of chemical firm Altana, eventually paid him €7.5 million. He reportedly spent the money on Egyptian real estate and exotic cars, including a Rolls-Royce Silver Shadow.
Then last November, Sgarbi allegedly threatened to send the sex tapes to newspapers unless Klatten paid him €40 million.
Klatten eventually turned to the German police, who coordinated a sting operation with their Italian counterparts to bug Barretta's Italian home and listen in on conversations between him, Klatten and Sgarbi.
Barretta told Italian police that Klatten was targeted because of her family ties to BMW. Her father, Herbert Quandt, cooperated with Nazi Germany and used slave labor during World War II.
“Helg's grandfather was Jewish and during the Second World War was deported to a slave factory in Germany. We wanted to avenge Helg's grandfather because we've been friends all our lives,” said Barretta according to British newspaper the Daily Telegraph.
BMW and the Quandt family have refused to comment on the affair. Munich prosecutor Anton Winkler confirmed that an investigation was underway but refused to elaborate further.
“Our investigations in this case are not yet concluded,” he told Süddeutsche Zeitung on Saturday.