Thanks to Porsche’s attempt to take over Volkswagen with an elaborate option strategy, high-stakes shareholder suits have finally come to Germany. International financial investors have brought actions against Porsche and Volkswagen, seeking damages in the order of several billions. The claimants argue, in short, that they suffered losses when Porsche cornered the market with the use of fancy derivatives and failed to disclose the true position it had taken.
In total, four such actions appear to be pending before the District Court (Landgericht) Braunschweig against Volkswagen and Porsche. A further action has been filed, just before year end 2011, in the Stuttgart District Court against Porsche.
But that’s not the only battle ground. Other shareholder actions are pending, and Porsche’s actions at the time are closely scrutinized by public prosecutors:
Last week, the Court of Appeals (Oberlandesgericht) in Stuttgart ruled on statements made Ferdinand Piech in his capacity as a member of the supervisory board of Porsche. It was published today. Piech’s statements to the effect that no-one fully understands the option scheme were made, apparently in a rather casual manner, in an interview during the presentation of new Volkswagen cars in Sardinia in May 2009. Still, the court took them at face value and, on that basis, found that Ferdinand Piech had violated material fiduciary duties (Kardinalpflichten) which he owed to the company as a member of the supervisory board: His statements showed that he failed to exercise proper control over the Volkswagen share option arrangements. If he could not understand what was going on, he should have investigated further, and potentially even tried to stop these transactions.
Technically, the judgment is a specific type of declaratory judgment on a resolution of Porsche’s AGM, which had granted discharge (Entlastung) to the supervisory board. The court set that resolution aside, based on Piech’s material violations. These findings, if upheld upon judicial review, could in turn be the basis for further actions.
Also today, it became known that the Public Prosecutor’s Office (Staatsanwaltschaft) in Stuttgart has commenced criminal proceedings against three high-ranking Porsche managers, including its former CFO, Holger Härter. The criminal complaint is based on the allegation that the managers misrepresented both Porsche’s financial situation (to the tune of EUR 1,4 billion) and the exposure under the Volkswagen option arrangements, when in March 2009 they re-negotiated a EUR 10 billion credit line. The matter is already at a fairly advanced stage, beyond a mere criminal investigation, since the public prosecutors have already filed the formal criminal complaint (Anklage) in court. In the German criminal legal system, the public prosecutor will file a formal complaint once the investigations have been completed, and in the prosecutors opinion, a criminal act has been committed. However, the court must still formally allow the complaint to progress (Zulassung der Anklage).
PS: The US litigation is covered in The New York Times’ DealBook.
PPS: The German custom of publishing judgments in anonymized form only is sometimes bordering on the bizarre. The Stuttgart court’s press release refers to “Hon.-Prof. Dr. techn. h.c. Ferdinand K. Piech” – reading the judgment, guess who F.P., V. AG, P. SE and its board members W. and H. are?
Cartoon (c) and courtesy of Stu Rees; www.stus.com