December 8, 2023

Ex-Porsche Officials Charged With Market Manipulation

The company’s former chief executive, Wendelin Wiedeking, was charged with making false public statements in 2008 about its plan to acquire Volkswagen.

Also charged was Holger Härter, Porsche’s former chief financial officer, who was thought to be the mastermind of the takeover plan, which involved the use of complex financial derivatives.

Prosecutors said they dropped charges of breach of trust against both men. In a joint statement Wednesday, lawyers for Mr. Wiedeking and Mr. Härter said that “after several years of investigation prosecutors have themselves recognized” that those accusations “are to the largest possible extent unfounded.”

In a statement Wednesday, prosecutors in Stuttgart, where Porsche is based, said that in at least five public declarations from March to October 2008, the company denied that it intended to raise its stake in Volkswagen. According to prosecutors, though, Mr. Wiedeking and Mr. Härter were already working to do exactly that.

When Porsche subsequently disclosed that it had raised its stake to about 75 percent of the voting shares of Volkswagen, VW’s stock soared, briefly making it the world’s most valuable company.

Investors who had bet that VW shares would fall were caught in what is called a short squeeze and lost billions of dollars.

“Despite all the risks involved in the stock market, a company is required to tell the truth,” said Claudia Krauth, a prosecutor in Stuttgart. “An untruth that impacts the stock price, leading to a manipulation of the market, is not among the normal risks that are to be expected on the stock exchange.”

The lawyers for Mr. Wiedeking and Mr. Härter said they were “astonished” that prosecutors had taken the side of investors who made “highly speculative and irrational wagers against the course of VW shares.”

Several New York hedge funds, including Elliott Associates and Black Diamond Offshore, had some of the worst losses. But their attempt to sue Porsche for $2 billion in damages was dismissed by a New York judge in 2010. Similar civil cases are still pending in Germany and Britain.

A Stuttgart state court must now determine whether to proceed to trial. If the two former executives were to be tried and found guilty, they could face up to five years in prison or a fine, the size of which would be determined by the court.

The takeover attempt was intended to bring together two German automakers whose histories had long been linked.

In 2005, the Porsche family controlled all of the voting shares in the company. That was when Porsche first acquired an 18.53 percent stake in Volkswagen and expressed its intention to further expand its acquisitions.

But after a series of bitter legal and political battles that rocked Germany’s staid business community, the tale quickly turned from David and Goliath — with Mr. Wiedeking as the scrappy underdog — into Icarus, the boy who flew too close to the sun.

Although Mr. Wiedeking is still credited for bringing Porsche back from the brink in the mid-1990s and turning it into one of the world’s best-known and most profitable sports car companies, his risky endeavor to borrow billions in an effort to take over the much larger Volkswagen nearly pushed the company into bankruptcy.

In 2009, Porsche’s supervisory board dismissed Mr. Wiedeking and Mr. Härter, months after announcing that it was abandoning its takeover plan.

Before the year was out, Volkswagen turned the tables, acquiring 49.9 percent of Porsche. In July, Volkswagen acquired the remaining 50.1 percent.

Victor Homola contributed reporting.

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