Porsche may have to pay a fine and a possible profit forfeiture over its 2008 failed takeover attempt of Volkswagen, according to the Financial Times.
A trial over market manipulation charges involving two of its former executives may lead to a conviction which puts Porsche at risk of paying the legal penalties, as per its interim report. It has maintained until now that the criminal investigation does not affect the company directly.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
Porsche has been sued by various hedge funds in Germany for a total of EUR5bn (US$6.23bn) but the lawsuits have not progressed much in courts. However, this new potential risk may be of worry to the automaker’s investors.
The trial is being held of former Porsche chief financial officer Holger Härter and former CEO Wendelin Wiedeking and is due to take place in 2015. They are accused of concealing the takeover plans to manipulate Volkswagen stocks but they have denied any wrongdoing.
Prosecutors in September 2014 focused on a Porsche press release of 26 October 2008 that showed its Volkswagen stock holdings and options ahead of its takeover plan. After the release, hedge funds betting on a Volkswagen stock decline rushed to cover their short positions, resulting in a stock price surge.
The prosecutors are now investigating if Porsche withheld a part of its options in the press release to manipulate the stocks. Hedge funds said that they would not have covered their short positions if they had known that Porsche had several put options on Volkswagen stock. They lost billions of euros as a result of this move.
While German law allows only people to be charged with offences, a fine of up to EUR10m can be imposed on a company if its executives are guilty of regulatory offences. The law states that the fine should also exceed the financial benefit obtained by the accused, in which case the EUR10m limit can be exceeded.
Porsche said that if the executives are guilty, “A possible economic benefit obtained by Porsche SE from the alleged criminal offence of the former members of the executive board could be confiscated.”
