German lawyers have filed a complaint against Deutsche Telekom for allegedly manipulating its share price before the company's secondary share issue two years ago.
Prosecutors yesterday filed charges alleging it defrauded shareholders by withholding information and overvaluing assets in order to influence the issue price of the shares, which eventually went on the market at €66.
Central to the complaint is the accusation that the Deutsche Telekom board ignored internal financial advice that the British mobile operator One2One was overvalued and went ahead with the purchase in 1999, paying €10 billion.
Mr Joachim Kröske, Deutsche Telekom's former financial controller, apparently warned the board in a letter that was allegedly withheld by the company. In it he said that he felt One2One was worth no more than €5 billion.
Deutsche Telekom declined to comment on the details of the complaint yesterday, saying only that all board members, although initially of different opinions, eventually agreed to buy One2One.
If the complaint leads to a full investigation, Deutsche Telekom shareholders would be entitled under German law to damages if it is proved a company gave misleading or incomplete information ahead of a public offering.
There are a large number of Irish shareholders in the group, which issued shares shortly after the Eircom flotation.
The allegation has attracted the interest of another team of prosecutors, which has spent the past three years investigating claims that Deutsche Telekom overvalued its property holdings before the company went public in 1996.
The complaint against Deutsche Telekom was filed by Binz & Partners, the law firm that supplied information to Düsseldorf prosecutors currently investigating multimillion bonuses paid to the board of Mannesmann after its takeover by Vodafone three years ago.
Deutsche Telekom shares fell nearly 10 per cent in trading in Frankfurt yesterday, closing at €11.66 after the company announced it was selling €2.3 billion of mandatory convertible bonds.
Deutsche Telekom chief executive Mr Kai-Uwe Ricke took charge last year, promising to reduce the company's debts to around €50 billion, from €64 billion by selling off non-core assets.
But yesterday's announcement sparked worries among analysts that the company might not be able to repay its still mountainous debts.
