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Porsche Wins Court Case to Dismiss Lawsuits

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On: Mon, Jan 10, 2011 at 5:24PM | By: Sherry Christiansen


Porsche Wins Court Case to Dismiss Lawsuits

Somewhere, there are a bunch of lawyers who are already off to a good year. They were retained by Porsche Automobile Holding SE and just scored a major victory in court. As a result of their lawyerly arguments, Porsche dodged a $2 billion lawsuit. If that’s not a reason for an end of the year bonus, nothing is!

The issue before the U.S. District court involved a suit brought against Porsche from a bunch of shareholders who felt that the automaker wasn’t being honest with dealings about the upcoming Volkswagen AG acquisition. Specifically, hedge fund managers claimed Porsche was misleading short-sellers. Got that?

Here’s the translation of the complaint. The suits set out to prove that Porsche attempted to scoop up a boatload of Volkswagen shares in secret. The complaint went on to say that as a result of this alleged action, investors weren’t given all the information about Porsche's intention to take a controlling interest in Volkswagen. Because of that their investment portfolio took a hit. This all goes back to the stock trading in 2008. However, Porsche was very upfront on October 26, 2009 when it stated that it already controlled the bulk of Volkswagen’s common stock. This, according to Porsche, is the real reason why short-sellers scrambled to cover their positions resulting in an upsurge of shares.

District Judge Harold Baer was running the gavel in this case when he dismissed the lawsuits against Porsche. For his written ruling, his honor stated that he was working off of precedent from the U.S. Supreme Court which held that “fraud claims such as those in the suits against Porsche apply only to securities listed on domestic exchanges and domestic transactions in other securities.”Judge Baer said “(this) applies to other similar complaints against Porsche.”

He went on to elaborate by saying, “The swaps at issue in the case were the functional equivalent of trading the underlying VW shares on a German exchange. Accordingly, the economic reality is that plaintiffs' swap agreements are essentially transactions conducted upon foreign exchanges and markets and not domestic transactions.” The judge also brushed aside those claims against the specific Porsche management team consisting of former CEO, Wendelin Wiedeking, and its former chief financial officer, Holger Haerter.

The big merger between Porsche and VW surged forward when the company shareholders voted in agreement to back a 5-billion euro stock sale. This is meant to lower the debt of the company and help make for a smoother transition for the merger.




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