Hypo Real Estate Holding GmbH I (Germany)
Hypo Real Estate Holding AG (“HRE”) is alleged to have misinformed the market about its U.S. subprime exposure and 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 was ultimately 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 HRE at the Regional Court Munich, Germany. HRE I covers the relevant period July 11, 2007 – January 15, 2008, while HRE II covers the relevant period January 15, 2008 – October 4, 2008. HRE I is currently pending at the German Supreme Court (Bundesgerichtshof), in the meantime HRE II has been stayed pending a decision from the German Supreme Court.
Volkswagen AG/ Porsche Automobil Holding SE (Market Manipulation) (Germany)
Porsche Automobil Holding SE (“Porsche”) 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 Porsche. In March 2008, Porsche 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 the extent of such control and that it 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 damages were filed against VW and Porsche 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 currently pending at the Higher Regional Court of Celle.
Vivendi S.A. (France)
From at least 1998 through mid-2002, Vivendi S.A. (“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 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. This case is currently ongoing.
Petróleo Brasileiro S.A. (Brazil)
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. Since 2014, Petrobras has been involved in a major corruption and bribery scandal affecting the correctness of its financial statements and public filings for much of the last decade. The disclosures of the extent of the bribes and corruption and their impact on the financial condition of the company caused Petrobras’ U.S. and Brazilian equity securities (common and preferred) to lose over 72% of their value. 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 inflated contract values as assets on its balance sheet, instead of at their actual values, thereby illegally overstating asset values in the billions. Since the scandal broke, Petrobras amended its overstatements by announcing 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. In response, 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. issued securities (ADR and U.S. bonds). These individual cases settled in the beginning of 2017. DRRT followed up its US filing with an arbitration proceeding in Brazil, with local counsel filing a request for arbitration asserting claims against Petrobras with the Market Arbitration Chamber (MAC, the arbitration institution of the Brazilian Stock Exchange, in August 2016. Afterwards two requests for joinders were filed, bringing the total of all claims to be between BRL 1.5 billion and BRL 2.77 billion in damages. This arbitration is currently ongoing.
Porsche Automobil Holding SE (2016) (Germany)
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 (“Porsche”) is the holding company of the Volkswagen group and its shares were negatively impacted by the news. As the holding company, Porsche inevitably had knowledge of VW’s manipulation practice and failed to inform investors.
On September 19, 2016, DRRT, represented by local counsel, filed a case on behalf of 147 institutional investors of over €547 million in damages against Porsche at the Regional Court Stuttgart, Germany. A model case was ordered, but on March 27, 2019, the Higher Regional Court of Stuttgart decided that no model case proceeding would be conducted in Stuttgart at the moment. On June 15, 2018, the Higher Regional Court of Braunschweig appointed Porsche as a model co-defendant in the Braunschweig model case. On August 12, 2019, the same court concluded that all claims stemming from investments in VW and Porsche (to the extent derived from Dieselgate) must be litigated in Braunschweig, and all claims stemming from investments in Porsche securities against Porsche must be litigated in Stuttgart. The Braunschweig model case is currently ongoing.
Saipem SpA (Italy)
Investors from around the world incurred losses as a result of Saipem’s ongoing misinformation of the market and its untimely disclosure of the correct, relevant information, which led to significant stock drops in December 2012, January 2013 and June 2013. In sum, Saipem misled investors, over time, about the financial impact and risk stemming from uncertain, bribery-procured, high-margin contracts, which produced substantial, negative consequences to Saipem’s 2012 and 2013 earnings. The financial consequences of Saipem’s illegal behavior in years prior and the deliberate misinformation of the market surfaced mostly in the financial year 2013 and relate to Saipem’s involvement in North African corruption to procure lucrative contracts over the years from 2007 to 2010, including allegations and evidence of bribes being paid by and through Saipem subsidiaries in Algeria, in order to win a series of contracts worth around €8 billion.
On December 4, 2017, DRRT filed a complaint against Saipem and former officers Mr. Pietro Franco Tali and Mr. Umberto Vergine, in the Court of Milan. The complaint was filed through our Italian co-counsel on behalf of over 25 institutional investors claiming over €300 million in damages. Also, on December 4, 2017, DRRT sent a demand letter to Saipem, as well as former officers Mr. Pietro Franco Tali and Mr. Umberto Vergine. The letter is asking for damages on behalf of over 140 institutional investors. Additionally, the letter will serve to re-start the statute of limitations for an additional five years.
Deutsche Bank AG (Deutsche Postbank AG Takeover) (Germany)
Deutsche Bank AG (“DB”) tried to take over the Deutsche Postbank AG (“Postbank”), but breached the German Securities Acquisition & Takeover Act in that it made a public takeover offer for a price below what it had previously paid other investors. DB acted in concert with Postbank’s parent company, Deutsche Post AG (“Post”), in concealing this previous price-arrangement. DB submitted a takeover bid of €25.00 per one Postbank share in 10/2010, when it had already agreed in 9/2008 with the Post, as majority shareholder of Postbank, to acquire Postbank, followed by an amended agreement in 1/2009. The case is currently pending at the Regional Court of Cologne.
Toshiba Corp. (Japan)
Toshiba Corp. (Toshiba) engaged in years of organized, top-down accounting fraud to the extent of over $1.2 billion going back to at least 2008 and continuing until it was uncovered in Q2/2015. On July 20, 2015, an independent investigation committee disclosed that Toshiba had overstated its operating profits by $1.22 billion. The report further confirmed that the fraud inside of Toshiba was organized and mostly coming from the lack or delay in reporting substantial losses connected to its infrastructure, semiconductor, personal computer and television business divisions. The report further documented that Toshiba’s President and Vice Chairman were aware of the profit overstatements and the delays in loss reporting, and had pushed their subordinates to meet unachievable financial targets.
On December 7, 2015, Japan’s Financial Services Agency (FSA) recommended a fine of ¥7.37 billion ($60 million) for Toshiba’s accounting-related violations, a record in Japan. The activities of the Japanese FSA further underscore the gravity of the accounting fraud at Toshiba and leave no doubt of its liability also for resulting investor losses.
DRRT filed the first complaint on June 22, 2016, for a group of 45 institutional investors totaling nearly $150 million in damages. A second complaint was filed on April 3, 2017, claiming approximately $400 million on behalf of 70 international and Japanese institutional investors. On June 13, 2017, the court consolidated both actions, which now proceed concurrently. Two more subsequent complaints were filed before the expiration of the statute of limitations. DRRT has retained experienced and reputable Japanese counsel Koga & Partners as local counsel. Koga & Partners already cooperated with DRRT in securing a landmark ¥11 billion out-of-court settlement in March 2015 relating to the 2011 Olympus $1 billion accounting fraud.
Banca Monte dei Paschi di Siena SpA (Italy) - Criminal Proceeding (2018)
The former management of Italy’s oldest bank, Banca Monte dei Paschi di Siena SpA (“Banca MPS”), purchased Italian government bonds that had been financed through a long-term repurchase agreement with Nomura International PLC (“Nomura”). Banca MPS and Nomura entered into a derivative contract, which was neither fully reported on the bank’s accounts nor fully disclosed on the 2009 financial statement, so as to conceal the economic substance of this transaction. As a result of this transaction, called “Alexandria,” Banca MPS had a € 4.7 billion net exposure to Nomura at the end of March 2010, nearly half its total Tier 1 capital and, therefore, substantially above regulatory limits. Banca MPS acknowledged doing similar swaps with Deutsche Bank (“DB”). In 2009 Banca MPS decided to restructure the notes. According to JP Morgan, the new notes were designed to pay for the substitution of the outstanding notes, but without any expense showing up on the financial statements, whereas the Alexandria notes should be shown as a derivative both for Banca MPS and for JP Morgan. However, Banca MPS refused to address the accounting this way as it wanted to hide the initial loss coming from the restructuring of these notes (by breaking them down into separate contractual components that could be hidden in the financial statements). Various contracts were entered into between Banca MPS and Nomura (and DB) between July and September 2009. In sum, a mandate agreement from July 29, 2009 showed a connection between Nomura’s loss on the Alexandria notes and the settlement value to be determined. As a result of this structure, no complete overview of the transaction and its economic effects could be seen. The statements omit any indication of the fair market value of the transaction, which resulted in a loss of at least €308 million (€220 million in losses from the cost of substituting the notes and €88 million in commissions due to Nomura for the transaction). In the wake of regulatory review, the European Central Bank asked Banca MPS to terminate the transaction, resulting in a settlement which was costly and resulted in losses for the banks. During the timeframe as of January 2, 2009 until November 14, 2012 the stock price dropped from € 33.52 to € 5.11, a loss of € 28.11 per share. Investors suffered losses due to the concealment.
On December 15, 2016, DRRT’s clients joined the criminal case against the indicted defendants as civil parties, bringing a claim for their collective holdings of 30 million BMPS common stock. This case has come to a close with guilty verdicts for all defendants. We await the court’s decision on the monetary damages to be awarded for the civil parties. Subsequently, DRRT has joined a second criminal proceeding, in 2018, against the replacement board, who further covered up these transactions. This trial is ongoing.
In addition to these two cases, DRRT has sent demand letters to BMPS. The demand letters were sent to protect any civil claims that are not covered under either of the criminal proceedings.
Volkswagen AG (2016) (Germany)
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 so-called “defeat device software” in various 2.0-liter diesel engine models, which dramatically reduced the nitrogen oxide (NOx) emissions of diesel cars during 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, resigned and a group of VW employees and management bean being investigated by the German Public Prosecutor’s office. Furthermore, VW 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, VW preferred stock from €167.80 to €106.00, a loss of over €15 billion in market capitalization. The VW preferred stock closed at €106.00, its lowest in more than three years, down more than 50% from its €255.20 high on March 16, 2015.
In 2016 and 2017, DRRT, represented by local counsel, filed cases against VW on behalf of over 500 institutional investors claiming around €5 billion in damages in the Regional Court Braunschweig, Germany. The model case is currently pending at the Higher Regional Court of Braunschweig. This court chose the model plaintiff pursuant to the KapMuG requirements and appointed an investor from our group. The case is currently ongoing as hearings began on September 10, 2018 and continue to this day.
Mitsubishi Motors Corporation (Japan)
On April 20, 2016, former Mitsubishi Motors Corporation President Tetsuro Aikawa admitted to the public that the Company had been cheating Japanese emissions tests since at least June 2013. On news of this scandal, Mitsubishi’s common stock dropped 15%, closing trading that day at ¥733 per share. Further news emerged on April 21 and 22, 2016, pushing Mitsubishi’s stock price down to ¥504 per share by close of business on April 22, 2016, representing a total market cap loss of approximately ¥345 billion ($3 billion) since the initial disclosure. Thereafter, on April 26, 2016, Mitsubishi made the shocking disclosure that its emission testing fraud extended back 25 years, to 1991. By the end of the day on April 27, Mitsubishi was trading at only ¥422 (down from ¥864 on April 19, the day before the scandal erupted). On May 9, it was revealed that Mitsubishi had been using the improper testing methods on all models of its cars. In the aftermath of the news of the scandal, the Company’s investors lost more than 50 percent of the value of their investment with its market capitalization declining by ¥435 billion ($4.1 billion). The loss in market capitalization after the initial disclosure on April 20, 2016 is directly related to the disclosure of the cheating scheme, as such drastic fluctuations were not normal in the lead-up to the revelation. The per share price drop of ¥442 (¥864 to ¥422) from the time of disclosure on April 20 until close of trading April 27 in Tokyo, represents a 51% decline and was sparked by extreme market volatility in Mitsubishi stock. Daily trading volumes on April 20 and 22 saw extreme excess trading above average daily volumes. An internal investigation revealed that the Company had been notified of the problems by numerous employees, dating back to at least February of 2005. As such, the Company’s financial statements, annual and quarterly reports, and other public disclosures contained false and misleading information and omitted material information about the company.
On June 26, 2017, DRRT filed its first complaint against Mitsubishi claiming over ¥18 billion ($160 million) on behalf of 118 institutional investors. A subsequent complaint was filed on April 20, 2018.
Steinhoff International Holdings N.V. (South Africa/Netherlands/Germany)
Steinhoff International Holdings N.V. (“Steinhoff”) is a Dutch holding company with South African headquarters and more than 40 local retail brands in over 30 countries. On December 6, 2017, Steinhoff’s CEO, Markus Jooste, resigned at the same time that he revealed the presence of substantial accounting irregularities in Steinhoff books going back to 2015 (which we now know started in 2009). Steinhoff’s shares precipitously fell from its high of €6 per share in August 2016, to €0.30 on December 22, 2017, erasing about 95% of the company’s entire market cap.
Steinhoff delayed the publication of its audited 2017 consolidated financial statements, and confirmed that it needs to restate its 2015 and 2016 financial statements, which have come out shedding light on the extent of the fraud. Criminal and tax investigations by local authorities are ongoing in Germany, South Africa, and the Netherlands, with suspicions that the company may have inflated its revenues and falsely valued its assets.
DRRT, in cooperation with experienced local partners is vigorously pursuing investor recovery efforts in South Africa, Germany and the Netherlands. Per § 3:305a of the Dutch Civil Code, DRRT has organized a non-profit foundation, Stichting Steinhoff International Compensation Claims, which will advance and coordinate global investor recovery. The foundation has already accumulated a critical mass of investors with billions of Euros in exposure and will position itself to seek a premium for its participants in any settlement negotiations.
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Danske Bank A/S (Denmark)
Since 2018, Danske Bank A/S ("Danske") has been the center of one of the largest money-laundering scandals the world has ever seen. The scandal centers on Danske’s Estonia branch and its suspicious non-resident transactions. For years, Danske said nothing publicly about the issue and even misrepresented the extent of its participation in the scheme. This was done while Danske repeatedly promoted its anti-money laundering policies and practices to the public. However, on February 27, 2018, several reports emerged indicating that Danske’s upper management had engaged in a cover-up of the scheme as Danske continued to grow its non-resident portfolio. Specifically, it was reported that in 2013, a whistleblower informed Danske that relatives of the Russian president, Vladimir Putin, and high-ranking members of the FSB (formerly the KGB) were behind one of the UK companies laundering money through the Estonian branch. On September 19, 2018, Danske issued an 87-page report confirming the knowledge and complicity of senior management in the massive money-laundering scandal. The report also revealed that the cash flow from non-residents through Danske's Estonia branch was a staggering amount – approximately $234 billion/ €200 billion. In response, Danske’s shares lost 50% and suffered a staggering DKK 12.8 billion in market capitalization losses. As a result, DRRT has initiated action against Danske in Copenhagen Denmark with local counsel, filing complaints against Danske on behalf of 232 institutional investors on March 16, 2019, and between October 16-18, 2019, totaling nearly DKK 5.3 billion in damages. DRRT is now looking to file a third wave of complaints in the first quarter of 2020. This case is currently ongoing.
Kobe Steel, Ltd. (Japan)
Kobe Steel, Ltd (“Kobe”) is Japan’s third-largest steelmaker, as well as a major supplier of aluminum, copper and other products around the world. Founded in 1905, with over 36,000 employees, Kobe and its group of companies have a presence in Japan, North America, South America, Asia and Europe. On October 8, 2017, Kobe admitted that, in order to meet quality standards, it had been falsifying test data for its aluminum and copper parts, which data was incorporated into reports on Kobe product strength and durability. Several days after the October 8, 2017 disclosure, it was reported that the falsified data extended to additional Kobe Steel products. According to Kobe, the falsified reports were discovered in inspections it conducted on products shipped to customers between September 2016 and August 2017. On March 6, 2018, Kobe released findings from an external investigation that confirmed management knowledge of the fraudulent reporting going back five decades. As a result, Kobe CEO, Hiroya Kawaska resigned. Finally, on June 5, 2018, prosecutors and police raided Kobe offices.
Prior to the disclosures, Kobe had forecast net profits of ¥35 billion ($308 million) for the financial year ending in March 2018. Kobe now admits that “it is difficult at this time to estimate the impact of the improper conduct concerning products of Kobe Steel and its group companies on business performance.” Kobe’s stock price originally dropped almost 40% from October 8 to October 13, and recovered then by November 2 to stay almost 20% down until the end of 2017 (a market cap loss of almost ¥100 billion). Amidst all of the uncertainties, Kobe also canceled a previously planned interim stock dividend. DRRT filed is first complaint against Kobe in Tokyo District Court on June 20, 2019 claiming over ¥5 billion in damages.
Daimler AG (Germany)
On September 18, 2015, the Volkswagen manipulation scandal was revealed. Even though Daimler AG ("Daimler") was not mentioned at the time, its stock price began a steady drop that topped at 16%, losses totaling €12.35 billion. As a response, Daimler’s CEO, Dieter Zetsche called a press conference on September 26 on which he categorically denied any emission manipulation, assuring investors that he was personally involved in all development projects. This explicit denial was included in Daimler’s 2015 Annual Report. Daimler’s price began a slow process of recovery. Less than a month later, on July 21, 2017, Der Spiegel revealed that the German car manufacturers: Volkswagen AG, Daimler AG, Bayerische Motoren Werke AG (BMW), Audi AG and Dr. Ing. H.c. F. Porsche AG (together the “cartel”) had been acting in concert since 1996 to suppress competition, gain and keep market share and increase their own profits. As a result of the revelations, Daimler’s stock price fell considerably, experiencing a 7.21%, drop from July 20 to 31, 2017 (€4.93 billion in market cap losses). Further investigations led to several raids on Daimler's headquarters and on June 2018, the German Transport Authority (KBA) ordered a recall of 238,00 Daimler vehicles due to the use of illegal defeat devices. In total, 774,000 vehicles have been recalled in Europe.
On December 30, 2019, DRRT, represented by local counsel, filed a complaint on behalf of 219 institutional investors claiming €896 million in damages before the Regional Court of Stuttgart. The complaint seeks compensation for purchasers of Daimler common stock (ISIN DE0007100000) between July 10, 2012 to June 20, 2018 (so-called disinformation period), during which Daimler breached its disclosure obligations under German capital market law. Daimler failed to inform the investing public about its use of illegal defeat devices in its diesel vehicles and of the associated risks and costs for investors. DRRT plans to file a second complaint for interested institutional investors in 2020.