Attorneys for Investor Kirk Kerkorian Accuse DaimlerChrysler of Fraud at Start of Trial

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WILMINGTON, Del. December 1, 2003; Dee-Ann Durbin writing for the AP reported that lawyers for Kirk Kerkorian claim the investor was duped out of billions of dollars in the merger of DaimlerChrysler AG, but the auto company said Kerkorian supported the deal and grew disgruntled only when his shares lost value.

The claims were made Monday at the start of a two-week trial in U.S. District Court. Kerkorian is suing DaimlerChrysler for more than $1 billion in compensatory damages and also is asking Judge Joseph Farnan Jr. to award punitive damages.

Kerkorian's attorney Terry Christensen said Daimler-Benz officials secretly organized a "massive and well-planned" takeover of Chrysler, all the while claiming the companies were being joined in a "merger of equals."

As a result, Christensen said, they avoided paying Kerkorian an acquisition fee of up to 62 percent on his shares when the companies merged. Kerkorian owned 14 percent of Chrysler's shares at the time of the merger, making him the company's primary shareholder.

"They took control and they didn't pay for it," Christensen said.

Christensen pointed to the fact that no American has been named to DaimlerChrysler's management board since the 1998 merger. The board, which controls many operations but doesn't hire or fire executives, will have 11 German members and one American member in January 2004, Christensen said. That American was on the board prior to the merger.

Christensen also played excerpts from a 2000 interview that DaimlerChrysler chairman Jurgen Schrempp did with the London-based Financial Times. In the interview, Schrempp describes Chrysler as a "division" of Daimler and said the German-heavy management "was always the structure I wanted."

Anthony Mandekic, the secretary and treasurer for Kerkorian's investment company Tracinda, said the interview was shocking.

"I couldn't believe they would lie," Mandekic said.

DaimlerChrysler attorney Jonathan Lerner responded that Schrempp was trying to brush aside questions about Chrysler's poor performance in the interview.

Schrempp hired Germans to fill Chrysler jobs for the same reason, Lerner said.

"He needed the company to succeed because the buck would stop with him," Lerner said.

Lerner repeatedly asked why Kerkorian failed to question the merger for years even though details were well publicized.

"If Mr. Kerkorian wanted any assurances about the merger of equals, he and his large legal team could have gotten them," Lerner said.

Lerner said Kerkorian made $2.7 billion because of the merger. Lerner claimed Kerkorian was "salivating" at the prospect of the deal, since he had been warned that Chrysler was losing money because of incentives, costs and shrinking international sales.

Lerner also argued that DaimlerChrysler's supervisory board, which does have the power to hire and fire executives, has five German and five American members.

"No matter now many times, no matter how many ways Mr. Christensen says it, there was no fraud in this case," Lerner said.

Kerkorian didn't attend the opening statements but was expected to testify Tuesday morning. Former Chrysler chairman Robert Eaton and Schrempp also are scheduled to take the stand later in the trial.

Christensen said after the hearing that Kerkorian is still open to a settlement with DaimlerChrysler, which paid $3 million in August to settle similar claims from other investors. DaimlerChrysler said that suit was groundless but it settled to avoid a jury trial. In this trial, there is no jury and Farnan will decide the case.