DaimlerChrysler: U.S. Freightliner case will be appealed

Reuters / December 18, 2006 - 5:00 am FRANKFURT -- DaimlerChrysler will appeal the ruling of a U.S. court on Friday ordering it and its heavy truck-making unit Freightliner LLC to pay hundreds of millions of dollars in a tangled multinational fraud case, a DaimlerChrysler spokeswoman said.

The Oregonian newspaper reported on Saturday that a Multnomah County Circuit Court jury had found Freightliner liable for shifting assets among several of its divisions in a bid to avoid a legal judgement.

Freightliner and its parent company, DaimlerChrysler North American Holding Corp., were ordered to pay $350 million in punitive damages -- an amount believed to be the largest such award ever in Oregon, the paper said.

The decision follows a British court ruling in the case last year ordering Freightliner, headquartered in Portland, Ore., to pay at least 250 million pounds ($489 million) to German truck maker MAN AG.

"We are very disappointed by the jury's ruling," a DaimlerChrysler spokeswoman said on Saturday, adding that Freightliner had never attempted to hide assets from MAN.

Daimler's appeal on the ruling would be heard next year, she said.

"We are confident that we ultimately will be able to successfully show that there was absolutely no misconduct on Freightliner's part," the spokeswoman said.

A MAN spokesman said the jury's ruling was a further legal victory for MAN and a confirmation that Freightliner is liable for damages sustained by the rival German truck maker.

DaimlerChrysler, the world's largest maker of commercial trucks, was found liable for $280 million of the punitive damages, with the remaining $70 million assessed against Freightliner, the newspaper said.

Final damages in the British case are expected to be determined next year, the paper said, citing MAN lawyers as saying Freightliner's payments excluding the punitive damages could rise as high as 350 million pounds in the case.

The Oregon court's ruling comes in the same week that DaimlerChrysler said it could lay off up to 4,000 Freightliner workers in North America next year in response to an expected 40-percent drop in orders for large trucks.

The case goes back to suspected accounting fraud in the 1990s at UK truck manufacturer ERF, now owned by MAN. MAN bought ERF in March 2000 from Western Star Holdings Ltd., a Canadian truck maker.

Western Star in turn was bought by Freightliner in late 2000.

The suspected accounting fraud stems from before Freightliner was associated with ERF, but MAN AG claims it did not discover the fraud until 2001.

MAN filed suit against Freightliner in a British court in 2002, a move that linked the truck company and its corporate parent to the case.

In 2005, a London judge found for MAN and issued an interim award of 250 million British pounds.

The British court backed MAN's claim that ERF's financial controller had defrauded MAN through an accounting scam carried out over several years that went undetected by auditors.

MAN said in the earlier London trial that it bought ERF thinking it was a profitable company, but subsequently found it was loss-making.