Banks cleared over Vodafone takeover pay-outs

Germany’s top banker and five co-defendants were acquitted of criminal charges today over payments to executives during a high-profile 2000 telecom takeover battle.

Prosecutors had charged that Deutsche Bank chief executive Josef Ackermann and the other defendants had acted illegally in approving or accepting the payments during Vodafone’s buyout of German cell phone rival Mannesmann – a €145bn deal that was the largest corporate merger ever at the time.

Presiding Judge Brigitte Koppenhoefer announced the ruling in a packed state courtroom in Duesseldorf, saying all six were not guilty of criminal charges of breach of trust or abetting a breach of trust.

Prosecutors alleged the defendants – Ackermann and three other Mannesmann board members, and two executives – broke legal obligations to the company and shareholders by approving bonuses and retirement packages of €78m to Mannesmann executives after they gave up their objections to the deal.

Though hardly unusual in many other countries, the payments were considered astronomical in Germany, where top executives rarely earn above €2m annually.

On trial along with Ackermann since January 21 were former Mannesmann chief executive Klaus Esser, former board chairman Joachim Funk, former Mannesmann personnel chief Dietmar Droste and two more board members – Juergen Ladberg, an employee representative, and Klaus Zwickel, the retired head of the IG Metall industrial union.

Although he received no money himself, Ackermann, who was on the Mannesmann board at the time and signed off on the payments, was charged with breach of trust along with Funk, Zwickel and Ladberg. Esser and Droste faced charges of abetting a breach of trust.

Prosecutors based the charges on allegations that the executives failed in their duty to properly “manage” or “safeguard” Mannesmann assets, and that Mannesmann’s board approved the payments after Vodafone refused to make them.

Defence lawyers said prosecutors failed to prove actual economic damage to the companies and that the payouts were appropriate compensation for increasing Mannesmann’s value.