By Andrew Saunders Thursday, 20 December 2012

Ex-Porsche execs accused of pulling a fast one

The former CEO and CFO of Porsche have been charged by German prosecutors with market manipulation during the firm's botched takeover bid for VW in 2008.

Wendelin Wiedeking, who was CEO of Porsche at the time, and Holger Harter who was CFO, are accused of issuing incorrect statements about the firm’s intention to acquire VW shares. If found guilty the pair could face up to five years in prison. They deny the charges. 

It’s the latest instalment in one of the longest running and most complicated corporate scandals to emerge from Germany in recent years. Those with good memories will recall that back in 2008, the small but profitable Porsche made an audacious stab at a reverse takeover of the much larger VW Group. Thanks to VW’s complex shareholding and governance structure, the bid required that Porsche should hold 75% of VW in order to be able to force the acquisition through. 

The market manipulation charges relate to statements made by Wiedeking and Harter at the point when VW shares were being acquired – essentially they are accused of secretly building up Porsche’s stake in VW towards that 75% target whilst at the same time making public statements to the contrary. Their statements, say the prosecutors in Stuttgart, resulted in Porsche’s shareprice dropping – but the defendants’s lawyers say that the statements were ‘correct in content’ and did not have any effect on the shares.

When it emerged that Porsche had acquired options on 75% of VW, the shares rose sharply, and hedge funds that had been shorting Porsche lost sums estimated at up to 30bn Euros very quickly. These and other potentially out of pocket investors will be watching the trial closely – a guilty verdict (even thought the case is against individuals rather than the company) could help them in their quest for compensation from Porsche.

The takeover attempt failed in 2009, leaving Porsche with a mountain of debt and resulting in the departure of Wiedeking and Harter. The sportscar maker’s car manufacturing operation was eventually folded into VW, which makes more cars in a week than Porsche does in a year, but plans for an all-in merger have been shelved. 

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