Daimler deal based on 'fraud'
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Kerkorian, left, arrives at a U.S. court for his case against DaimlerChrysler.
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WILMINGTON, Delaware (Reuters) -- Billionaire investor Kirk Kerkorian told a U.S. court that the 1998 creation of DaimlerChrysler, one of the biggest deals in automotive history, was based on "deception" and "fraudulence."
Kerkorian's testimony came Tuesday, the second day of the trial in U.S. District Court in Wilmington, Delaware, where he and his investment firm, Tracinda Corp., are seeking to prove that what Daimler-Benz executives pitched as a "merger of equals" was actually a secret takeover of Chrysler by Germany's oldest automaker.
The 86-year-old Las Vegas casino operator, who owned 13.7 percent of Chrysler Corp. shares before its $36 billion link-up with Daimler-Benz, is demanding more than $1 billion in compensatory damages. He contends that Daimler hid its true intentions in order to avoid paying a higher premium for Chrysler's shares.
DaimlerChrysler has repeatedly denied any wrongdoing. But Kerkorian says he was duped into believing that the merger would create two semi-independent companies with headquarters in Germany and Michigan.
His lawsuit was filed after Juergen Schrempp, architect of the 1998 deal, told The Financial Times in October 2000 that he had always meant to make Chrysler a mere division of a new global automotive giant.
In his testimony, Kerkorian said he was "very surprised, very upset" when he read the interview.
Asked by Tracinda lawyer Terry Christensen why he was upset, Kerkorian replied: "It was deception. I got more upset when Holden was fired. Two people came out from Stuttgart and just took over Chrysler. I think that's when I called you."
He was referring to former Chrysler boss James Holden, who was ousted in November 2000 and replaced by Daimler executive Dieter Zetsche as German managers exerted increasing control over the third-largest U.S. automaker.
In his opening statements on Monday, DaimlerChrysler lawyer Jonathan Lerner contended that Kerkorian was never concerned about whether Germans controlled the merged company. He also alleged that Kerkorian had been anxious to sell his Chrysler stock before an anticipated fall in its value.
'Deceit and fraud'
Kerkorian, who launched his own hostile takeover bid for Chrysler in the mid-1990s, disputed those claims, however. He spoke clearly but slowly, but the courtroom heated up when Lerner questioned him about his sometimes turbulent past as Chrysler's largest shareholder.
"You are representing a client who is in deceit and fraud, Daimler, and you're treating me the same way and I don't like it," Kerkorian snapped at one point during his cross-examination.
DaimlerChrysler, which has lost two-thirds of its market value since the merger deal was announced, settled a parallel lawsuit with a separate group of former investors for $300 million in August.
That was one of the largest out-of-court deals ever reached by U.S. shareholders.
Asked by Christensen whether it was possible to realize the synergies of a merger if one company takes a dominant position, Kerkorian replied: "No. You have to have trust and honesty. If you get deceit, fraudulence, it doesn't work."
In addition to Schrempp, current and former executives ordered to appear and testify at the trial include Holden, DaimlerChrysler Chief Financial Officer Manfred Gentz and Robert Eaton, who was the chairman of Chrysler when Schrempp clinched what he hailed as a "marriage made in heaven."
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