Ex-Porsche Men Acquitted of Market Manipulation in VW Bid--2nd Update

By Ilka Kopplin and Eyk Henning

STUTTGART, Germany--A court acquitted two former top executives of Porsche SE, finding them not guilty of market manipulation related to the company's botched 2008 takeover attempt of Volkswagen AG.

The verdict could reduce potential financial risks for the family that controls the German automotive group which itself faces possible multibillion-dollar costs and penalties related to its diesel-engine emissions scandal.

"The allegations are completely unfounded," Judge Frank Maurer said.

Prosecutors had alleged the Porsche executives--former Chief Executive Wendelin Wiedeking and ex-Chief Financial Officer Holger Härter--concealed their plans for months to gain control of Volkswagen and then shifted strategy when the attempt went awry.

The verdict of not guilty could serve as a precedent in several civil cases pending against Porsche, where hedge funds are hoping to recover billions of euros in losses related to the failed takeover attempt which led to a dramatic spike in the value of Volkswagen stock.

The judge also ruled that Porsche doesn't have to pay a fine. Shares in the company rose more than 3% on the Frankfurt bourse on Friday.

Prosecutors had sought roughly EUR800 million ($869.5 million) in penalties from Porsche and jail time for the two executives. The prosecutors said they are considering an appeal, a move that would take the case to federal court.

"If prosecutors have some sense of decency, they will abstain from appealing," Mr. Härter said. In a separate trial in 2013, Porsche's former finance chief in 2013 was found guilty of intentionally making false declarations during loan negotiations related to the Volkswagen takeover bid.

The high-profile trial, which is unrelated to Volkswagen's emissions-cheating scandal, has shone the spotlight on the Porsche and Piëch families that control Volkswagen's voting shares. The two families, among Germany's richest, are the descendants of VW Beetle creator Ferdinand Porsche.

The trial piqued public interest because longtime patriarch Ferdinand Piëch chaired Volkswagen's supervisory board while also serving on the supervisory board of Porsche at the time of the attempted takeover. The families weren't accused of wrongdoing in the case.

The role of Hans Dieter Pötsch, Chairman of Volkswagen has also come under scrutiny. Mr. Pötsch was one of the architects of deal which rescued Porsche from collapse in the aftermath of the takeover attempt. It involved Volkswagen's acquisition of Porsche's lucrative sports-car making business.

Mr. Pötsch's involvement has raised questions among some investors about his suitability for steering Volkswagen through the emissions scandal.

In October 2008, Porsche disclosed it held 42.6% of Volkswagen shares and controlled another 31.5% through stock options. The company also said it aimed to increase its stake to above 75% the following year, having earlier denied it sought a stake of that size, a crucial threshold for controlling a target company under German law.

The disclosure shocked markets because investors who had bet Volkswagen's stock price would fall suddenly realized there were few shares left to close their bets. Volkswagen's share price climbed above EUR1,000 the following week, briefly making it the world's most valuable company.

Prosecutors said they had evidence that showed Porsche suffered EUR7.5 billion in losses in the weeks leading up to Oct. 26, 2008 when the company issued the news release saying it sought to increase its stake in Volkswagen to 75%. They alleged Porsche was at risk of bankruptcy in the days that followed. Judge Maurer said there was no evidence that the defendants issued the news release to avert Porsche's collapse.

Investors, many of them hedge funds, lost roughly EUR5 billion in the so-called short squeeze. Some are now hoping to recoup their losses through the courts.

Write to Ilka Kopplin at ilka.kopplin@wsj.com and Eyk Henning at eyk.henning@wsj.com

(END) Dow Jones Newswires

March 18, 2016 11:50 ET (15:50 GMT)

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