Mannesmann–Vodafone Six trial unravels

The case against former Mannesmann chief Klaus Esser and five other board members over bonus pay-offs was crippled yesterday by weak testimony from auditors KPMG.

The six have been charged in Germany with breach of fiduciary duty by arranging bonus and pension payments of €57m during the £180bn takeover of the German company by Vodafone.

The prosecution case is that these were payments for consenting to the takeover. But other witnesses have told the court that the bonus had no bearing on the decision. The hoped-for white knight, Vivendi, had already backed out of a bidding war at that time.

KPMG auditor Gerhard Nunnenkamp explained to the court that there had been minor procedural problems with the board resolution approving the bonus but that these were resolved in discussions with the board. He took the view that the remuneration was properly the concern of the board.

In the end, KPMG merely flagged the payments as unusual in the company accounts.

Esser’s £10m bonus caused outrage in Germany, where corporate pay hasn’t hit the heights common in the US and the UK. He was also seen as having delivered one of the crown jewels of corporate Germany to a foreign firm.

The prosecution case now probably depends on an attempt to persuade the five trial judges that a rise in share price is the wrong criterion for executive pay under German law.