Former Porsche executives to stand trial

Wendelin Wiedeking, left, with Holger Härter

By Chris Bryant

Two former Porsche executives must stand trial over the sports car maker’s failed attempt to take over Volkswagen, a Stuttgart court has ruled, paving the way for one of the most keenly awaited cases in German corporate history.

Wendelin Wiedeking and Holger Härter (Wendelin Wiedeking, left, with Holger Härter), respectively Porsche’s former chief executive and chief financial officer, were charged in 2012 with “information-based market manipulation” in relation to Porsche’s attempt to acquire VW via a complex and secretive options strategy.

On Tuesday, a Stuttgart appeals court overturned an earlier lower court ruling that there was insufficient evidence to allow a trial to begin. Lawyers for the two former executives said both were confident the accusations would be found at trial to be completely unfounded.

Hedge funds, who were wrongfooted by the takeover attempt and lost money, are expected to carefully monitor the trial as they pursue separate claims for billions of euros compensation from the Porsche SE holding company.

Porsche has won the dismissal of some investor lawsuits in recent months but several remain outstanding.

In Germany, courts will only allow criminal trials to begin if a conviction is deemed likely based on the evidence presented by prosecutors.

However, if there is an equal possibility of conviction and acquittal, a court may still decide that hearing the evidence at trial is necessary, the appeal court said in a statement explaining its decision.

Porsche SE, the holding company, said it continued to view the accusations as unfounded but welcomed the fact that the accused would now have the chance to clear up the accusations in court. Porsche SE is not a participant in the case.

Porsche secretly began acquiring options to buy VW shares in 2008 but dismissed speculation that its ambition was to acquire a 75 per cent stake that would allow it to impose a domination and profit-transfer agreement.

However, prosecutors claimed the two executives had by February 2008 determined that the company would try to take over VW the following year.

Porsche’s public statements, prosecutors claimed, caused some investors to sell short VW stock.

When the true extent of Porsche’s options position was revealed in October 2008, VW shares surged to record highs as hedge funds betting on a fall in VW’s share price rushed to cover their short positions.

Porsche’s failed takeover attempt left it with a big debt pile that pushed it to the brink of bankruptcy and its carmaking operation was ultimately absorbed by VW in 2012. The two accused stood down from Porsche in mid-2009.

Mr Härter was convicted on a separate charge of credit fraud last year and was fined.