Ex Porsche bosses to stand trial

A German appeals tribunal has reversed a decision to allow Wendelin Wiedeking to escape official scrutiny, ordering the controversial former Porsche SE boss to stand trial over his failed takeover bid for Volkswagen AG.

Wiedeking and Porsche’s former Chief Financial Officer Holger Haerter have been ordered back to the Higher Regional Court of Stuttgart on charges of information-based market manipulation.

While Porsche, Wiedeking and Volkswagen deny any wrongdoing, the duo has borne the brunt of financial market fury after briefly turning the listed Volkswagen AG into the most valuable company in the world in 2008.

Porsche and Wiedeking have faced a myriad of lawsuits and investigations on the back of the automotive minnow’s attempt in October 2008 to swallow the whale that is the Volkswagen Group.

That attempt failed, largely through the efforts of Volkswagen Group Chairman (and Porsche heir and significant shareholder) Ferdinand Piech, but not without coming agonizingly close to success.

Significantly, the takeover bid forced short-selling share market speculators into a impossible position, dumping millions of dollars as they fought over share options already committed to either Porsche or those defending Volkswagen.

Porsche needed 75 per cent of Volkswagen shares to complete its takeover and admitted in releases in October 2008 that it controlled 74.1 percent of the available shares.

Volkswagen shares soared beyond $1000 as short sellers, betting big on Volkswagen shares continuing their fall in value, suddenly realised the stock they’d borrowed on had been locked away, sending the value of remaining stocks skyrocketing.

While German prosecutors began investigating the takeover attempt in 2009, impacted investors have also sued Porsche for €5 billion ($7.05b), claiming it lied to investors about its intentions and timing of the bid.

The crux of the court case against the two former Porsche executives is that the financial markets accused Porsche of not disclosing enough information about the takeover early enough to prevent the short-selling crisis.

The Stuttgart Appeals Tribunal agreed there was enough evidence to pursue the case, directly overturning a Regional Court of Stuttgart decision from April 2014.

According to appeals tribunal spokesman, Stefan Schueler, the appeals tribunal judges found “numerous indications that could suggest that there was a hidden decision to increase the stake as they could suggest the opposite valuation by the lower court. Because the evidence rules are a highly sensitive issue, the case has to go to trial.”

In a joint statement, lawyers for Wiedeking and Haerter said the case was baseless and both would be exonerated, a position reiterated in statements from Porsche and Volkswagen.

“Porsche’s statements on its position in the takeover attempt were accurate at all times,” the statement said.

Porsche SE responded with a more detailed statement, welcoming the final step in the legal process.

“Based on the information available to it, Porsche SE has always taken the position that the allegations of the public prosecutor against the two former executive board members are without merit,” Porsche’s statement said.

“However, the Company welcomes that finally, five years after the public prosecutor commenced investigations, these proceedings can be dealt with in court so that the accused can clear all allegations against them. Porsche SE is not a party in the proceedings and does not have access to the case files.

“The public prosecutor accuses former chairman of the executive board, Dr Wendelin Wiedeking, and former CFO, Holger Härter, of committing information-based market manipulation in connection with the acquisition of the investment in Volkswagen AG by Porsche SE in 2008,” Porsche’s statement declared.

Other charges, including breaching fiduciary duty, trading-based market manipulation and publishing duties, have been dropped by the public prosecutor.

Pictured from left: Wolfgang Porsche, Wendelin Wiedeking and Holger Harter at the Porsche Automobil Holding SE General Meeting in 2008.