June 27, 2012 / 2:53 PM / in 5 years

Porsche plaintiffs suffer setback to $5 billion claims

BERLIN (Reuters) - Investors suing Porsche SE (PSHG_p.DE) over its botched 2008 takeover of Volkswagen (VOWG_p.DE) suffered a setback to claims for more than 4 billion euros ($4.99 billion) of damages as German court hearings on Wednesday exposed initial cases as sketchy.

An illuminated Porsche logo is pictured on a building of a Porsche retail centre in Niederwangen, outside Bern March 9, 2012. REUTERS/Michael Buholzer

Swiss investment company My Capital-MC and a German private investor, seeking compensation for 4.7 million euros of losses from short-selling VW shares in a bet that the price would fall, have yet to convince German judges of Porsche’s wrongdoings.

“There are high hurdles” to prove that the sports car manufacturer violated legal standards defined by Germany’s top civil court, said judge Stefan Puhle after three hours of hearings at the regional court in Brunswick, northern Germany.

“This is a tough act to prove,” Puhle added, pointing out that one of the two claimants even failed to adequately explain the level of damages claims.

Investors say that throughout 2008 Porsche concealed its plans to acquire VW and instead secretly piled up its holding. In March 2008, Porsche dismissed rumors that it was pursuing a takeover of the much-bigger VW. Seven months later, however, it disclosed that it held almost 75 percent of VW shares, of which 31.5 percent were previously undisclosed cash-settled options.

The Brunswick court has scheduled a ruling on both cases for September 19. Hearings on three other lawsuits, including a case brought by Elliott Associates and other U.S. investment funds for 2 billion euros in damages, have yet to be scheduled.

“At the moment, the court does not yet follow our reasoning,” said Franz Braun, who represents plaintiffs in three of the five lawsuits.

Porsche’s statement of October 26, 2008, caused VW shares to surge to 1,005 euros within days, briefly making the Wolfsburg-based carmaker the world’s most valuable company as short-sellers raced to cover positions.

Porsche SE, the publicly traded holding company that owns stakes of just over 50 percent in the German sports car maker and in VW, has repeatedly denied the allegations.

“We’re satisfied with the negotiations,” Porsche spokesman Wolfgang Glabus told reporters in Brunswick. “Today was a step in the right direction.”

Europe’s biggest auto manufacturer and Porsche have been working for almost three years to combine their operations after VW turned the tables in the tug-of-war and bought 49.9 percent of Porsche in December 2009.

The risks related to the pending lawsuits caused VW to drop initial plans for a merger with Porsche’s holding company. VW is now aiming to buy the remainder of Porsche’s car-making operations with minimum taxation costs.

The hearings in Germany coincide with ongoing legal proceedings in the United States. In December 2010 a New York court dismissed a $2.5 billion lawsuit by short-sellers claiming that Porsche used manipulative trades to hide its stock positions. Most of the plaintiffs lodged an appeal, while other cases are pending at a separate New York court.

Reporting By Andreas Cremer; Editing by David Goodman

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