Volkswagen AG (DE)
DE0007664005 (VW common stock), DE0007664039, DE0007664062 (VW preferred stock), DE0006937733 (Porsche preferred stock, old ISIN), DE000PAH0038 (Porsche preferred stock, new ISIN since Sept. 1, 2008), DE0006757008 (Audi AG common stock), Debt securities guaranteed or issued by the VW Group
Relevant Period: June 6, 2008 – September 25, 2015
On Friday, September 18, 2015, the U.S. Environment Protection Agency (“EPA“) issued a notice of violation of the Clean Air Act against Volkswagen AG (“VW“) and other affiliates, resulting in a potential fine of up to $18 billion ($37,500 per vehicle and infraction, covering 482,000 vehicles in the United States). Only two days later, on Sunday, September 20, 2015, VW admitted to installing a so-called “defeat device software“ in various 2.0 liter diesel engine models, which dramatically reduces the nitrogen oxide (NOx) emissions of diesel cars during the testing, thereby distorting the outcome of official emission tests. On Tuesday, September 22, 2015, VW admitted that 11 million diesel-powered vehicles were affected worldwide. In the meantime, Martin Winterkorn, VW’s CEO, has resigned. A group of VW employees and management personnel is currently being investigated by the German prosecutor’s office. Furthermore, VW has set aside € 6.5 billion for matters in connection with the defeat device. On Monday and Tuesday, September 21 and September 22, 2015, after VW admitted to fitting its U.S. diesel vehicles with the defeat device, VW common stock plunged from €167.40 to €111.20 (XETRA), VW preferred stock from €167.80 to €106.00 (XETRA), a loss of over €15 billion in market capitalization. The VW preferred stock closed at €106.00 (XETRA), its lowest in more than three years, down more than 50% from its €255.20 high (XETRA) on March 16, 2015. On March 14, 2016, local counsel filed a case against VW on behalf of 278 institutional investors claiming €3.25 billion in damages in the Regional Court Braunschweig, Germany. On September 19, 2016, local counsel filed its second case on behalf of 263 institutional investors of over €1.25 billion in damages against VW at the Regional Court Braunschweig. On May 23, 2017, additional investors joined a third case against VW filed at the same court. The model case is currently pending at the Higher Regional Court of Braunschweig. This court chose the model case lead plaintiff pursuant to the KapMuG requirements and appointed an investor from our group.
Porsche Automobil Holding SE (DE)
DE0006937733 (Porsche preferred stock, old ISIN), DE000PAH0038 (Porsche preferred stock, new ISIN since Sept. 1, 2008)
Relevant Period: June 6, 2008 – September 25, 2015
In September 2015, the U.S. Environment Protection Agency issued a notice of violation of the Clean Air Act against Volkswagen AG (“VW“) and other affiliates, resulting in a potential fine of up to $18 billion ($37,500 per vehicle and infraction, covering 482,000 vehicles in the United States). On Sunday, September 20, 2015, VW admitted to installing a so-called “defeat device software“ in various 2.0 liter diesel engine models, which dramatically reduces the nitrogen oxide (NOx) emissions of diesel cars during the testing, thereby distorting the outcome of official emission tests. On Tuesday, September 22, 2015, VW admitted that 11 million diesel-powered vehicles were affected worldwide. Porsche Automobil Holding SE (“PHSE“), as its owner, has inevitably had knowledge of VW’s manipulation practice within the scope of organizational fault. On September 19, 2016, local counsel filed a case on behalf of 147 institutional investors of over €547 million in damages against PHSE at the Regional Court Stuttgart, Germany. The model case is currently pending at the Higher Regional Court of Stuttgart.
Petróleo Brasileiro S.A. (BR)
BRPETRACNOR9 (common stock), BRPETRACNPR6 (preferred stock)
Relevant Period: December 31, 2009 – August 15, 2016
Petróleo Brasileiro S.A. – Petrobras (“Petrobras“), one of the largest oil and gas companies in the world and formerly the largest corporation in Brazil in terms of revenue, has been involved in a major corruption and bribery (graft) scandal since 2014, affecting the correctness of its financial statements and public filings for at least the past 6 years. The disclosures of the extent of the bribes and corruption and their impact on the financial condition of the company have causes its U.S. as well as Brazilian equity securities (common and preferred) to lose over 72% since the scandal became public. Senior Petrobras executives have been accused of (and convicted of criminal actions) accepting bribes from construction companies in exchange for awarding inflated price contracts to them, allowing in return kickbacks to these companies as well as funneling illegal payments to the ruling party. The financial condition of Petrobras was particularly affected by recording construction projects at the (inflated) contract values as assets on its balance sheet (see notes to financial statements), instead of at their actual values, thereby illegally overstating asset values in the billions. This has been corrected in the meantime, by Petrobras’ announcement of corrections in assets to the tune of over $10 billion. Moreover, Petrobras violated its representations to its shareholders concerning its self-imposed Code of Ethics covering anti-corruption and anti-bribery practices. On May 13 and August 20, 2015, DRRT filed cases for various institutional investors against Petrobras and individual defendants in the U.S. District Court of New York for damages resulting from investments in U.S. issues securities (ADR and U.S. bonds). These individual cases settled in the beginning of 2017. In August 2016, local counsel filed a request for arbitration with the Market Arbitration Chamber (MAC), the arbitration institution of the Brazilian Stock Exchange, afterwards two requests for joinders were filed, bringing the total of all claims to be between $380 and $660 million in inflation/rescission damages.
BlackBerry Limited (CA)
This case against BlackBerry Limited (“BlackBerry“), a technology company that provides telecommunication solutions, concerns BlackBerry’s accounting practices in respect of revenues recognized on the BlackBerry 10 devices and the impact of such accounting practices on BlackBerry’s financial statements for the fiscal year 2012 (released on March 28, 2013) and Q1 2013 (released on June 28,2013). BlackBerry recorded revenues on the BlackBerry 10 when they were shipped into distribution channels even if the sales price was not fixed or determined yet. These revenues recognized on those devices were falsely inflated and materially misleading. Nevertheless, the revenues were used to create the write-downs. This false revenues led to a violation of U.S. GAAP and BlackBerry’s own accounting principles. In December 2013, DRRT filed statement of claim against BlackBerry Limited and the former CEO Thorsten Heins and former CEO Brian Bidulka in the Ontario Superior Court of Justice, Canada.
Hypo Real Estate Holding AG (DE)
Hypo Real Estate Holding AG (“HRE“) is alleged to have misinformed the market about its U.S. subprime exposure in the inherent risk in the acquisition of Depfa. HRE’s stock experienced large losses following its January 16, 2008 statement that it had to write down €390 million to cover the U.S. subprime exposure and even more by the time it had to be rescued by the German government in October 2008. On January 15, 2009, DRRT filed a case on behalf of institutional investors with more than €900 million in claims against Hypo Real Estate Holding AG at the Regional Court Munich, Germany. HRE I is covering the relevant period July 11, 2007 – January 15, 2008, while HRE II is covering the relevant period January 15, 2008 – October 4, 2008, the latter has been stayed. HRE I is currently pending at the German Supreme Court (Bundesgerichtshof).
Lloyds Banking Group PLC (UK)
The directors of Lloyds have breached fiduciary duties and duty of care owed directly to the shareholders in the context of advising them that the acquisition and the connected Government recapitalization of Lloyds were in their best interests, and procuring the shareholders’ approval of the transactions on the basis of misleading information and the concealment of the true financial circumstances of HBOS. The English counsel filed a claim on behalf of the group of claimants on November 19, 2014.
Porsche Automobil Holding SE (DE)
It is alleged that Porsche Automobil Holding SE (“PHSE“) and its former officers Mr. Wiedeking and Mr. Härter systematically lied to and misled the market regarding its true intentions to take over and dominate Volkswagen AG (“VW“), and that VW tacitly went along with this misrepresentation by violating its own duties to publish insider information related to a possible or planned take-over by PHSE. In March 2008, PHSE rejected any rumors it was seeking a control and domination of VW as pure speculation, but then went on to secretly build a combined equity and option portfolio with control over 74.1% in VW shares before disclosing on October 26, 2008 that it had that much control and was now seeking to dominate VW. In 2011, two cases on behalf of institutional investors from around the world with over €2.1 billion in damage claims were filed against VW and PHSE at the Regional Court Braunschweig, Germany. On April 13, 2016, the Regional Court of Hanover designated this case as a model case proceeding, and consequently stayed all cases filed based on the same facts and circumstances. The model case is pending at the Higher Regional Court of Celle.
Vivendi S.A. (FR)
From at least 1998 through mid-2002, Vivendi engaged in a scheme to artificially inflate its share prices by materially and fraudulently misstating its financial results as well as its debt and liquidity situation. This rendered Vivendi’s financial statements and balance sheets published in its Annual Reports for all years between 1999 and 2001 materially false and misleading. Only shortly after the ouster of Vivendi’s then-CEO Jean-Marie Messier on July 3, 2002, did Vivendi disclose that, following an acquisition spree directed by Messier, Vivendi had amassed approximately $18 million in debt and was consequently facing a severe liquidity crisis. In order to avoid default on its largest credit obligations, the company was forced to immediately secure both bridge and long-term financing. In the wake of these announcements, the price of Vivendi’s common stock and U.S. ADRs plunged by nearly 25% and remained depressed for a substantial period of time. In 2012, local counsel filed a complaint against Vivendi Universal S.A. and its former CEO Jean-Marie Messier in the Tribunal de Commerce in Paris, France representing over 100 international institutional investors with collective damages exceeding €1 billion.