BERLIN — Germany’s highest court upheld a lower court ruling convicting former EM.TV topper Thomas Haffa and his brother and former finance chief Florian Haffa of distributing false company information and misleading investors about the license company’s financial state in 2000.
A Munich regional court in April last year found the Haffas guilty of releasing incorrect figures to boost EM.TV’s share price; they were fined a total of E1.44 million ($1.9 million). EM.TV eventually was forced to slash its annual earnings estimate by 90%, revealing losses of $1.2 billion in a profit warning and causing its stock price to plummet 90%.
One of the most valuable companies on the now-defunct Neuer Markt index, EM.TV went into freefall following the scandal, barely escaping bankruptcy. In order to survive, EM.TV has had to fork over much of the company as well as a major stake in Formula One racing and proceeds from the sale of its share in media conglom Tele Munchen Group to creditors.
Although the company was forced to write off millions from the devaluation of other assets, it has trimmed down significantly and reached profitability this year.
The lower court ordered Thomas Haffa to pay $1.6 million and fined Florian Haffa $319,000.
The federal court ruling is expected to help some shareholders with their own lawsuits against EM.TV and the Haffas. The disgruntled investors had been awaiting the outcome of the criminal proceedings before going ahead with their legal actions.
EM.TV shareholders have filed 94 suits seeking compensation following the 2000 scandal. According to EM.TV, German courts have decided 59 of the cases, all in favor of the company.
The Federal Court of Justice has agreed to hear the appeals of 55 former shareholders whose suits were rejected by the regional and higher regional court in Munich before the ruling on the criminal charges in April 2003. Yet the criminal ruling doesn’t have an immediate effect on civil damage claims and shareholders still need to prove their investment decision was based on the false statements made by company execs.