Daimler Investigated for Insider Trading | Business| Economy and finance news from a German perspective | DW | 18.08.2005
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Daimler Investigated for Insider Trading

German regulators are launching an investigation regarding possible insider dealings of DaimlerChrysler's shares. The German-US company is already being probed on bribery charges in the US.


Who has taken off their white gloves at DaimlerChrysler?

Suspecting possible insider trading and stock manipulation following the publicized resignation of DaimlerChrysler's chief executive Jürgen Schrempp on July 28, the German federal agency for financial supervision (BaFin) announced it was launching an official investigation.

"We have launched a formal inquiry," said the the BaFin spokesperson Sabine Reimer on Wednesday.

Galerie Jürgen Schrempp Vorstandsvorsitzender der DaimlerChrysler AG

Schrempp's resignation was announced on July 28

A formal inquiry means that financial institutions are required by law to disclose the names of all those involved in securities transactions. Purchasing or selling shares while privy to information which is not publicly available is considered illegal according to the German law.

"We will find out from the credit institution who bought and who sold the shares," said Reimer.

"Then we'll try to find cross-links to the people who knew about Schrempp's plans," she said.

The investigation is expected to take several weeks. A spokesperson for DaimlerChrysler, the world's second largest producer of luxury vehicles, offered no comments.

More than a coincidence?

After Jürgen Schrempp's resignation was announced, DaimlerChrysler shares rose dramatically -- by nine percent in Frankfurt and almost ten percent in New York. The rise was the steepest intraday gain posted in the company's history. More than 61 million shares were traded on that day, 10 times the average volume.

Dieter Zetsche, fuer Chrysler zustaendiges Vorstandsmitglied der DaimlerChrysler AG

Schrempp's successor, Dieter Zetsche

Schrempp, who was responsible for the $36 billion takeover of Chrysler Corp. in 1998, had been severely criticized for eroding more than 30 percent of the company value since the merger. He will succeeded by head of Chrysler, Dieter Zetsche.

Jürgen Grässlin, president of a minority shareholders group that owns 1.5% of DaimlerChrysler, said shortly after Schrempp's resignation that "insider trade has opened the floodgates." Grässlin claims to have known of the forthcoming resignation twelve days before it was officially announced.

"If we, the shareholders, had invested into DaimlerChrysler at that point, we would've made ourselves rich," said Grässlin.

Parallel investigations

DaimlerChrysler is currently pursuing legal action against Grässlin for spreading false information. Grässlin has denied the charges.

Logo des Automobilherstellers Daimler Chrysler vor dunklen Wolken

Dark clouds over DaimlerChrysler

Yet several DaimlerChrysler executives have indeed sold their shares since Schrempp's resignation was made public. Eckhard Hordes, who heads the Mercedes division, acquired 92,500 shares at 34.40 euros on July 29, only to sell them at 39.58 euros on the same day.

The German-US concern is currently under investigation by the US regulators and Department of Justice over alleged bribery of foreign officials. The US Securities and Exchange Commission is also investigating alleged irregularities in the company's participation in the Oil for Food program in Iraq.

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