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Charges Filed in Porsche Credit Fraud Case

March 6, 2012
3 min to read


FRANKFURT - Porsche Automobil Holding SE said Tuesday that former finance chief Holger Härter and two other managers have been charged with credit fraud in the auto maker's attempted takeover of Volkswagen AG.


The Stuttgart prosecutors' office said the three are accused of providing inaccurate information when negotiating follow-up financing for a €10 billion ($13.22 billion) loan maturing in March 2009 in connection with the takeover attempt, reported The Wall Street Journal.

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Mr. Härter's lawyer couldn't immediately be reached for comment, but news agency DAPD reported that his lawyer said Mr. Härter rejected the allegations.


Porsche said the other two people didn't hold executive titles. The prosecutors' office didn't disclose their names but said they worked for Porsche's finance department and at least one still works for the German car company.


In a written statement to one bank, the three managers claimed the liquidity requirement for the exercise of call options for Volkswagen shares would be about €1.4 billion lower than it actually was, according to the prosecutors' office. They are also accused of concealing that Porsche had sold put options for about 45 million ordinary Volkswagen shares.


At the same time, investigations into accusations of market manipulation and embezzlement against former executive-board members are continuing. The investigations are very complex and time-consuming and won't be finished before midyear, the prosecutors' office said.


Porsche initially tried to take over its much-larger peer, spending about €23 billion over three years to build up a 51 percent stake in Volkswagen. But the bold plan backfired when credit markets dried up and the company's debt ballooned.

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In October 2008, Porsche disclosed it had a nearly 75 percent stake in Volkswagen using so-called cash-settled options to build up its stake. Cash-settled options, which are settled in cash instead of shares, didn't need to be disclosed to regulators under German law at the time.


The news of its stake triggered a huge run-up in Volkswagen shares, making the German auto maker the world's most valuable publicly traded company for a two-day period that month.


Porsche's goal was to raise its stake to 75 percent, which would have allowed the Stuttgart-based company to get its hands on Volkswagen's large cash reserves to help it pay for the cost of the takeover.


But by May 2009, the global recession and slumping car sales put Porsche's bid on the ropes. The sports-car maker's plan to raise its stake above 75 percent was thwarted and it was forced to seek a rescue by Volkswagen.


Its effort also triggered a legal backlash. Several international investment funds accused Porsche of cornering the market in 2008 during its ill-fated takeover attempt of Volkswagen.

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In August 2009, Volkswagen had the upper hand in negotiations. It signed a complex agreement to forge a joint company. Legal and tax considerations since have stalled integration. Earlier this week, Volkswagen Chief Financial Officer Hans Dieter Poetsch said that talks on integrating Porsche's sports-car unit into its brands continue, but the timing of a deal was still uncertain.


A key aspect of the current evaluation is a potential tax payment of about €1 billion if Volkswagen and Porsche go ahead with the deal before mid-2014.


Volkswagen can exercise the respective call option to buy the remaining 50.1 percent stake in the sports-car unit between March 1, 2013, and April 30, 2013, or between Aug. 1, 2014, and Sept. 30, 2014. An earlier deal, however, would enable Volkswagen and Porsche to reap more cost synergies from joint operation.

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