Elliott Associates, one of the world’s oldest, and definitively the world’s most aggressive hedge funds, brought suit against Volkswagen Chairman Ferdinand Piëch and his cousin Wolfgang Porsche. The suit alleges, as Der Spiegel reports, that both conspired in the takeover of Porsche by Volkswagen, and that they defrauded shareholders. The suit asks for punitive damages of €1.8 billion ($2.43 billion.) This is not the first lawsuit in that matter, there are pending lawsuits against Volkswagen and Porsche, asking for a total of €5.7 billion. This is the first suit against Piëch and Porsche in person. It marks a “new level of escalation,” as Der Spiegel says. Escalation also, because some say the NSA is an informant.
Elliot is owned by Paul E. Singer, who is known as the toughest in this tough business. Singer even took on the big guns of the Argentine Navy. One of their ships was seized in Ghana, Africa, after the country ignored a New York court that sentenced Argentinia to pay $1.3 billion to Elliott.
During the failed takeover of Volkswagen by Porsche, many hedge funds did bet on the Volkswagen share to lose value. They took massive short positions to cash in on the loss. After it became known that Porsche had its aims on a 75 percent majority in Volkswagen, and its hands on large packages of options, the Volkswagen share went the other way. It shot to over €1,000, also because the hedge funds performed massive short covering. Courts are supposed to recover the money hedge funds lost at the gambling table.
Singer’s hedge fund alleges that Piëch and Porsche used clandestine methods which are “otherwise only known in the worlds of espionage and organized crime.” According to the suit, the caper was conducted through a secret war room in Austria, using “unregistered mobile phones” and “encryption methods that usually are available to governments only.”
Commenters at Der Spiegel rightly remark that to identify clandestine phones and hardened cyphers requires “information from the intelligence services.” You can’t tell a hardened phone from looking at it, only from trying to listen in. This would only be relevant, says the comment, “if there was illegal surveillance.” America’s NSA has bugged millions of mobile phones, also to gather business intelligence. The commenter recommends that “Singer should better sue his NSA informant.”