Two former heads of Porsche have entered a not guilty plea in a trial in which prosecutors are alleging they mislead markets by improper reporting of the company’s plans to buy out rival Volkswagen.
Former Chief Executive Officer Wendelin Wiedeking and Chief Financial Officer Holger Haerter today rejected the charges, claiming they were being used as scapegoats by hedge fund operators who lost money when the plan to acquire Volkswagen fell through.
Wiedeking told Stuttgart judges that prosecutors are “effectively functioning as agents of hedge funds suing over the failed takeover bid”. Prosecutors laid out charges that in 2008, Wiedeking and Haerter misled the markets half a dozen times, including withholding details about options used to quietly buy shares before disclosing the bid for Volkswagen, which at the time was Porsche’s larger rival.
The bid, which later crashed in the midst of the credit crunch of the financial crisis, initially “burned” hedge funds by driving up the cost of Volkswagen shares. Wiedeking told the court the charges have been designed to help investor lawsuits seeking as much as $5.7 billion in damages.
“With these charges, prosecutors are obviously trying to help hedge funds to turn the tides in their unsuccessful civil suits,” said Wiedeking. “The idea that there was a hidden plan to take over VW all along is absurd.”
Prosecutors are claiming Wiedeking and Haerter deceived markets in their “surprise” Oct. 26, 2008 statement which disclosed that Porsche held 74.1 percent of VW and had decided to acquire a 75 percent stake and control of the company under German law. They say the two men had decided on this seven months earlier and were already deep in discussions with investors about financing the acquisition of a dominant stake in VW.
“The company’s communication strategy was aimed at veiling the intention to acquire VW,”’ prosecutor Aniello Ambrosio told the court.
As financial fate would have it, the plan collapsed spectacularly in the wake of the financial crisis, drying up the loans that Wiedeking and Haerter had arranged. Ironically Porsche had to be rescued by VW, which purchased Porsche’s manufacturing wing, leaving behind a sole holding company with its only real asset being Porsche’s legendary name.