Feeds

Vodafone CEO faces Mannesmann merger fraud probe

German authorities not happy

  • alert
  • submit to reddit

The essential guide to IT transformation

Chris Gent, CEO of Vodafone, and a number of high-ranking executives in Vodafone and Mannesmann (the German company bought out by Voadfone in November 1999) are under investigation by the German authorities for fraud.

It is alleged that the huge bonuses paid to the execs on completion of the merger were part of a sweetener to let it go through (Dusseldorf's public prosecutor has already used the word 'bribes'). The facts of the situation would certainly lend credence to that theory.

Vodafone subtly leaked its plans to buy Mannesmann to the press in July 1999 (all the analysts, of course, claimed it was their nous). Then it made a formal £64 billion offer on 15 November. Mannesmann's value at the time was £59 billion.

Mannesmann, and in particular its CEO, Klaus Esser, was extremely dismissive of the bid. It described it as "wholly inadequate" and "extremely unattractive". Esser went rushing off to the press exclaiming that the merger would go ahead over his dead body. He also used some dirty tricks, including putting pressure on Goldman Sachs not to advise Vodafone. Later, a German judge said his and his company's conduct was "totally disgraceful and unacceptable".

Vodafone wasn't to be put off though and a made a huge £79 billion offer four days later. It created a massive stink. Even the German chancellor Gerhard Schroeder got involved, saying a takeover would destroy the "culture" of Mannesmann. This sparked UK prime minister Tony Blair to warn Schroeder off (though he didn't mention BMW's purchase of Rover, ahem).

Then there was lots of patriotic talk about how the German stock exchange had never allowed a hostile bid to go ahead and why should it start now, and so on and so forth.

And then - would you believe it? - Esser decides that actually everything is all right, Vodafone is not so bad and he didn't really mind have the company that he had transformed from nothing to a powerful player being eaten up in front of his eyes and all his powers removed.

The suggestion is that the £30 million given to Esser as a redundancy payment and the £19 million paid out to other Mannesmann execs had something to do with this sudden change of mind. And then there was the £10 million bonus that Gent received for getting the deal through.

Apart from Esser and Gent, the other two key players under investigation are Klaus Zwickel, head of the powerful IG Metall trade union and fromer member of Mannesmann's supervisory board, and Josef Ackermann, also a member of the supervisory board and now a top bod at Deutsche Bank.

Vodafone denies any claims of illegal behaviour, saying it was obliged to pay out bonuses that had already been agreed upon by the Mannesmann board and it had simply inherited.

Gent came under fire just this July for paying himself just under £1 million in bonuses on top of his £7 million salary. ®

Related Stories

Vodafone tipped to buy Mannesmann (July 1999)
Mannesmann rejects Vodafone's £64bn bid (November 1999)
Confusion reigns over Mannesmann bid (November 1999)
Chris Gent's generosity continues - for himself (July 2001)

Build a business case: developing custom apps

More from The Register

next story
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
Premier League wants to PURGE ALL FOOTIE GIFs from social media
Not paying Murdoch? You're gonna get a right LEGALLING - thanks to automated software
Online tat bazaar eBay coughs to YET ANOTHER outage
Web-based flea market struck dumb by size and scale of fail
Amazon takes swipe at PayPal, Square with card reader for mobes
Etailer plans to undercut rivals with low transaction fee offer
US regulators OK sale of IBM's x86 server biz to Lenovo
Now all that remains is for gov't offices to ban the boxes
XBOX One will learn to play media from USB and DLNA sources
Hang on? Aren't those file formats you hardly ever see outside torrents?
Class war! Wikipedia's workers revolt again
Bourgeois paper-shufflers have 'suspended democracy', sniff unpaid proles
'Aaaah FFS, 'amazeballs' has made it into the OXFORD DICTIONARY'
Plus: 'EE, how shocking, ANOTHER problem I face with your service'
prev story

Whitepapers

Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Solving today's distributed Big Data backup challenges
Enable IT efficiency and allow a firm to access and reuse corporate information for competitive advantage, ultimately changing business outcomes.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.