The chief executive of Deutsche Bank, Josef Ackermann, along with the former Mannesmann CEO Klaus Esser, plus four other board members, are currently on trial in Dusseldorf, Germany for fraud-related charges. The others facing charges include Klaus Zwickel (former head of IG Metall, Germany’s largest union), Dietmar Droste (former Mannesmann personnel chief), Joachim Funk (Mannesmann’s former chariman), and Jurgen Ladberg (former works council chief).
The men are charged with criminally approving severance packages worth a total of $110m for Esser and other managers of the conglomerate.
The charges stem back to the 154bn-euro ($188bn) takeover of Mannesmann AG in 2001 by Vodafone Group Plc. German prosecutors allege bonuses tied to the record bid for the German company were excessive and designed to overcome opposition to the takeover.
The four-month show trial of German executives supposedly guilty of corporate greed has not been a success story for the German government or the state prosecution. The presiding judge, Brigitte Koppenhoefer, concluded in late March that there was no proof of any criminal activity so far, and that criminal charges were unwarranted.
Yet German prosecutors have turned to increasingly desperate attempts to introduce more evidence. They are now attempting to force Scott Mead, the London-based former Goldman Sachs star banker to testify in the trial as a witness. Goldman Sachs acted as an adviser to Vodafone at the time of the acquisition.
According to reports, judge Brigitte Koppenhoefer has declined prosecution attempts to summon Mead to testify in Germany, however the prosecution has indicated it will probably use other procedures involving calling upon the cooperation of the UK legal authorities, in order to secure the banker as a witness.
The prosecution believes Mead can answer questions concerning a conversation in a men’s toilet between a Goldman Sachs banker and an unknown person, during which the banker is alleged to have suggested that the three-month takeover battle between Vodafone and Mannesmann was a sham, and that the bonus for Esser was a bribe.
The prosecution also wants to hear Mead’s vision of the time of events in early February, 2000, specifically on the days when the takeover deal was agreed and the bonus amounts settled.
The long takeover battle for Mannesmann was an emotional issue in Germany, where there was general hostility to one of the cornerstones of the country’s economy being acquired by an overseas mobile phone operator.
However, the trial is being viewed by most outsiders as nothing more than a politically inspired witch-hunt of German executives. The German Chancellor Gerhard Schroeder recently criticized the high pay of some German executives as not moral.
In most Western countries, such payments would barely have raised eyebrows as top executives have little incentive to stay on after a takeover. In the Mannesmann case, Vodafone needed Esser’s expertise in particular to mastermind the sale of the German’s company’s core engineering interests.
The prosecution case also took another body blow when it was revealed that Hans-Otto Sallmann, the original state prosecutor who investigated the case, said he was convinced it was not a criminal matter.
