We have covered the Porsche hedge fund litigation here before. One of the challenges that the claimants face is to built their case of market manipulation, given the restrictions of German civil procedure. As Karin Mattusek, who covers the Porsche litigation for Bloomberg Law, put it: “Porsche Plaintiffs Seek $5 Billion With Limited Tools”. The claimants do not have access, through pre-trial discovery or disclosure, to documents and emails that record Porsche’s internal communication and decision making process, but still have the full burden of proof.
To overcome these limitations, the claimants had hoped that the various criminal investigations against former Porsche board members would unearth information that supports their case. Getting access to the files of the various criminal investigations is an alternative route that claimants routinely try to obtain information that is not in the public domain. A decision by the Court of Appeals (Oberlandesgericht) Stuttgart of June 2013, which was published recently, in this respect is a set-back for the claimants.*
The claimants had applied to the Public Prosecutor’s Office in Stuttgart (Staatsanwaltschaft) and requested to be granted access to the files in the criminal investigations against Wendelin Wiedeking, the former Porsche CEO, and Holger Härter, Porsche’s former CFO.** The public prosecutor’s office denied the request, as did the District Court (Landgericht Stuttgart) upon appeal. These decisions were confirmed by the Court of Appeals.
Under German law, an injured person (Verletzter) can get access to the files in order to prepare a civil action for damages. The court held, however, that the concept of “injured person” within the meaning of Sec. 406e German Code of Criminal Procedure (StPO) must be narrowly construed. Investors who are allegedly injured by acts of market manipulation within the meaning of Sec. 20a Securities Trading Act (WpHG) do not qualify as injured persons within that sense. The rules on market manipulation in the Securities Trading Act are not provisions that are designed to protect the individual investor, but the integrity of the securities markets at large. Regular readers of this blog will recognize that line of argument – it is identical to the one that the Federal Supreme Court (Bundesgerichtshof) used in its recent decision on damages claims in a case where a mandatory offer under the Takeover Act (WpÜG) was not made.
At the end of its order, the Stuttgart court discusses relatively briefly whether the claimants’ information requests could also be based on Sec. 475 StPO, and denies a right of inspection of the files on that basis as well. However, regarding that provision, there appears to be a glimmer of hope for the claimants, since the application to inspect the files was rejected as too wide and unspecific for the purposes of Sec. 475 StPO. So it appears that such an application could be re-filed. In addition, relevant information may come into the public domain during the criminal trial when the prosecution presents its evidence. But whether and when there will be a trial is an open question. And even if there is one, a deal – the German term of art for a plea bargain is deal – would prevent the evidence from being presented in public. So there is plenty of room for strategis and tactics….
* The case is OLG Stuttgart,June 28, 2013 – 1 Ws 121/13.
** Of course, the published Stuttgart court order is sanitized in line with the German tradition of case reporting. The case talks about market manipulation charges against “W.” and “H.” in relation to actions they took as board members of “P. Automobil” and its dealings in “V.” shares, so I am pretty confident that we have identified the right case.