Former Porsche SE (PAH3) Chief Financial Officer Holger Haerter is one of three managers charged over statements made to a bank when the holding company refinanced a 10 billion-euro ($13.2 billion) loan in 2009.
The men are accused of understating Porsche’s liquidity needs by 1.4 billion euros if all purchase options the company held on Volkswagen AG (VOW) (VOW3) shares had been exercised, Stuttgart prosecutors said in an e-mailed statement today, without disclosing any names. Haerter will fight the charges, his attorney, Anne Wehnert, said in an e-mailed statement.
Along with the criminal investigation, investors in the U.S. and Germany are suing Porsche, accusing the company of misleading them about plans to take control of Volkswagen. A planned combination of the companies was called off last year because of legal uncertainties related to the litigation.
“The risk to the merger will increase because the normal shareholder won’t want to pay too much and the funds will use this to their advantage to seek a significantly higher settlement,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg- Essen.
The managers also withheld some information about put options tied to VW shares that Porsche sold, the Stuttgart prosecutors said today.
“An economy university professor specializing in options trading confirmed after a thorough review of the facts, that the prosecutors’ method regarding the alleged liquidity need isn’t viable, so the statements given to the bank were correct,” said Wehnert, Haerter’s attorney. The bank didn’t say it hadn’t been adequately informed, she said.
The charges today reflect “the position of the state prosecutor,” Frank Gaube, a Porsche spokesman, said in a telephone interview. “This is not a court ruling and until there is a ruling there is a presumption of innocence.”
The bank mentioned by the prosecutors continues to be involved in the company’s refinancing, Gaube said.
Investors claim Stuttgart, Germany-based Porsche misled them by denying through much of 2008 intentions to acquire VW. Porsche said in October of that year it controlled most of VW’s common stock, causing the shares to surge as short-sellers raced to cover their positions.
There are four suits pending at a court in Braunschweig, Germany, with plaintiffs seeking a total of more than 2 billion euros in damages. Porsche has denied the allegations.
Porsche SE is the publicly traded holding company that has a majority of VW’s common shares and owns 50.1 percent of the German sports-car maker of the same name. VW owns the remaining 49.9 percent of the automotive business.
The portion of the Stuttgart probe investigating allegations Porsche executives Wendelin Wiedeking and Haerter manipulated the price of VW shares is continuing and may take at least until the middle of the year to be resolved, the prosecutors said.
Complex, Time Consuming
“Those investigations have turned out to be very complex and time consuming,” prosecutors said.
A Stuttgart court ruled separately last week that Ferdinand Piech violated his duties in 2009 when commenting about the VW options transactions. Piech, chairman of VW and also a member of Porsche’s supervisory board, was wrong to tell reporters he didn’t know the magnitude of Porsche’s option risks and that he hadn’t sought clarity about it, the court said.
Porsche has said it will ask Germany’s top civil court for permission to appeal the Stuttgart ruling. Piech said the court’s decision was wrong.
A year ago, the Stuttgart prosecutors said their probe into Wiedeking and Haerter had “solidified” suspicions Porsche didn’t adequately inform the market between 2007 and 2009 about its intentions to take control of VW. They also added breach of trust allegations over the use of derivatives, saying the instruments may have put Porsche at the risk of bankruptcy.
Porsche and VW agreed to combine in August 2009 and planned a full merger, after Porsche failed with its hostile bid for VW. The Stuttgart probe and investor lawsuits prompted VW to consider alternatives to the 2009 agreement, under which the merger was to be completed by the end of 2011.
To avoid further delays, Wolfsburg, Germany-based VW may drop the merger and instead buy the rest of Porsche’s car-making business, two people with direct knowledge of the situation said in November. That would leave the Porsche holding company as the legal entity responsible for any lawsuits.
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