Court Acquits Former Porsche Executives

STUTTGART, Germany–A regional court acquitted two former top executives of Porsche SE, finding them not guilty of market manipulation related to the German auto maker’s botched attempt in 2008 to take over rival Volkswagen AG.

Prosecutors had alleged the Porsche executives–former Chief Executive Wendelin Wiedeking and finance chief Holger Härter–concealed

“The allegations are completely unfounded," said Judge Frank Maurer, who also ruled Friday that Porsche doesn’t have to pay a fine.

The verdict could have a bearing on several civil cases in which hedge funds are trying recover billions of euros in losses from Porsche related to the takeover attempt. It could reduce potential financial risks for the family that controls both Porsche and Volkswagen, which itself faces possible multibillion-dollar costs and penalties related to its diesel-engine emissions scandal.

Porsche shares rose more than 3% in Frankfurt trading on Friday.

Prosecutors had sought roughly €800 million ($869.5 million) in penalties from Porsche and jail time for the two executives for lying to investors. The prosecutors said they are considering an appeal, a move that would take the case to federal court.

“If prosecutors have some sense of decency, they will abstain from appealing," Mr. Härter said in a brief interview. In a separate trial in 2013, the former Porsche finance chief was fined €630,000 after being found guilty of intentionally making false declarations during loan negotiations related to the Volkswagen takeover bid.

The market-manipulation trial has shone the spotlight on the Porsche and Piech families that control Volkswagen’s voting shares. The two families, among Germany’s richest, are the descendants of VW Beetle creator Ferdinand Porsche.

The trial piqued public interest because longtime patriarch Ferdinand Piech was chairman of Volkswagen’s supervisory board while also serving on the supervisory board of Porsche at the time of the attempted takeover. The families weren’t accused of wrongdoing in the case.

The role of Hans Dieter Potsch, who became chairman of Volkswagen’s supervisory board in fall 2015, has also come under scrutiny. Mr. Potsch was one of the architects of deal that rescued Porsche from collapse in the aftermath of the takeover attempt. It involved Volkswagen’s acquisition of Porsche’s lucrative sports-car making business.

Mr. Potsch’s involvement has raised questions among some investors about his suitability for steering Volkswagen through the emissions scandal, even though it is unrelated to the recent trial.

In October 2008, Porsche disclosed it held 42.6% of Volkswagen shares and controlled another 31.5% through stock options. The company also said it aimed to increase its stake to above 75% the following year, having earlier denied it sought a stake of that size, a crucial threshold for controlling a target company under German law.

The disclosure shocked markets, as investors who had bet Volkswagen’s stock price would fall realized suddenly that there were few shares left to close their bets and stem their losses. Volkswagen’s share price climbed above €1,000 the following week, briefly making it the world’s most valuable company.

Prosecutors said they had evidence that showed Porsche suffered €7.5 billion in losses in the weeks leading up to Oct. 26, 2008, when the company issued the news release saying it sought to increase its stake in Volkswagen above 75%. They said Porsche had incurred the losses on the options they held for Volkswagen stock and that only a massive surge in its rival’s shares would have helped to prevent Porsche from going bankrupt.

Judge Maurer said there was no evidence that the defendants issued the news release to avert Porsche’s collapse.

Investors, many of them hedge funds, lost roughly €5 billion in the so-called short squeeze on Volkswagen shares in 2008. Some are now hoping to recoup their losses through the courts. Ilka Kopplin and Eyk Henning, The Wall Street Journal – March 19, 2016

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