Hedge funds waging an uphill legal fight against Porsche Automobil Holding SE seemingly notched a victory when a court asked 21 people, including company officials, to testify. The catch is most won’t talk.
Conflicts with related criminal probes mean that most of the witnesses will likely assert their right not to testify at hearings scheduled next week, according to three people familiar with the case, who declined to be identified because the decisions aren’t public.
“I wouldn’t know why, of all places, a hedge-fund suit would be the right place to comment,” said Tanja Pfitzner, a Frankfurt-based trial lawyer who isn’t involved in the case. “It could be a very short hearing.”
The case is one of about a dozen filed in Germany by investors seeking a total of 5 billion euros ($5.4 billion) over claims Porsche lied to investors when it made an aborted bid to acquire Volkswagen AG in 2008. Judges have dismissed at least four cases without hearing from witnesses, so a Hanover court’s decision in a suit filed by hedge funds, including Elliott International LP and Perry Partners LP, gave the funds a chance to change their fortunes.
For the first two days of hearings, scheduled for May 5 and 6, the court requested testimony from members of Porsche’s 2008 supervisory board, including former VW Chairman Ferdinand Piech and Porsche Chairman Wolfgang Porsche, according to a March witness list. The board members are being investigated by Stuttgart prosecutors for market manipulation.
Piech, 78, resigned after losing a power struggle unrelated to the litigation, abruptly ending more than two decades atop Europe’s largest carmaker. He stepped down from all posts at the German automaker with immediate effect, the Wolfsburg-based manufacturer said in a statement on Saturday.
Additionally, on day two, the court also wants to hear from ex-Porsche Chief Executive Officer Wendelin Wiedeking and former Chief Financial Officer Holger Haerter, who are scheduled to stand trial on charges related to the issue in July.
Lawyers for the men either didn’t immediately reply to e-mails seeking comment or declined to comment. All of the witnesses under investigation have denied wrongdoing. A spokesman for the funds declined to comment.
Albrecht Bamler, a spokesman for Stuttgart-based Porsche, declined to comment.
Suspects in criminal probes have the right to decline to testify if it might incriminate them, similar to guarantees under the U.S. constitution. Even witnesses that aren’t being probed, including three former Porsche employees scheduled to appear on May 7, may benefit from the same protections, said Michael Tsambikakis, a criminal defense lawyer in Cologne.
“You don’t have to testify if that puts you in danger of being prosecuted,” said Tsambikakis. Outside a formal probe, “it’s just a bit more tricky to show the conditions are met.”
Final Witness List
The Hanover court has asked the witnesses whether they’re willing to testify and replies must be turned in Tuesday. It may cancel some hearings if it’s clear no one wants to appear, according to Stephan Loheit, a spokesman for the tribunal. A final witness list may be released as soon as this week.
Porsche has faced a series of investigations and lawsuits since disclosing in October 2008 that it controlled 74.1 percent of Volkswagen AG, partly through options, and was seeking to acquire 75 percent as part of a takeover strategy. The announcement caused Volkswagen’s stock to jump as short sellers raced to buy shares to repay borrowed stock in bets that VW would fall.
Porsche SE -- which is controlled by the descendants of auto pioneer Ferdinand Porsche -- owns 50.7 percent of the common stock in Wolfsburg, Germany-based Volkswagen following the 2012 sale of the Porsche AG sports-car operations to VW in the wake of the unsuccessful takeover battle. Plans for a merger of Volkswagen and Porsche were dropped because of legal risks stemming from the cases brought by the investors.
The funds are trying to show that Porsche’s leadership lied to the markets about its intentions in the Volkswagen bid. To prove what key executives planned at the time, the funds have to rely on people who worked for the company or belonged to its leadership.
Most of those witnesses, with long ties to the company, won’t be sympathetic to the hedge funds. Pfitzner called it an “awkward constellation” for litigators who sometimes have no choice but to seek testimony from people who seem hostile to their case.