(Adds lawyer's comments on trial dates, paragraphs 3, 12-13)
By Tom Brown
DETROIT, Nov 26 (Reuters) - Juergen Schrempp, the architect of the 1998 creation of DaimlerChrysler AG will face allegations in U.S. court next week that he lied when he characterized one of the biggest deals in automotive history as a "merger of equals."
The exact timing of a courtroom appearance by Schrempp, DaimlerChrysler's chief executive, has been left to the discretion of his lawyers by Judge Joseph Farnan of U.S. District Court in Wilmington, Delaware.
But Farnan has ordered Schrempp to testify at the high-profile trial, which begins on Monday. DaimlerChrysler attorneys said on Wednesday it was scheduled to last through Dec. 17 with the German auto boss likely to take the stand sometime in the second week.
DaimlerChrysler and Schrempp face allegations of fraud and a violation of U.S. securities law from billionaire investor Kirk Kerkorian who owned 13.7 percent of Chrysler Corp. shares before its $36 billion link-up with Daimler-Benz. Kerkorian claims that what Schrempp billed as a "merger of equals" was actually a secret takeover by the German automaker, which hid its true intentions to avoid paying a higher premium for Chrysler shares.
DaimlerChrysler has repeatedly denied any wrongdoing.
Kerkorian's suit was filed after Schrempp told the Financial Times in October 2000 that he had always meant to make Chrysler a mere division of a new global automotive giant. Attorneys for Kerkorian, a legendary dealmaker himself, said earlier this year they would seek $1.5 billion to $2 billion in total damages in the case.
The Kerkorian case is the only remaining lawsuit over the DaimlerChrysler deal. DaimlerChrysler settled with a separate group of former investors for $300 million in August.
The settlement was one of the largest out-of-court deals ever reached by U.S. shareholders and, together with comments favorable to Kerkorian and his Tracinda Corp. investment group in a pretrial ruling by Judge Farnan last week, it would appear that DaimlerChrysler faces a decidedly uphill battle in court.
"In my opinion, Tracinda has offered sufficient evidence to ... support its allegations that defendants never intended the transaction to be a merger of equals, but instead, planned a secret takeover of Chrysler from the beginning," Farnan wrote in rejecting requests to throw out the lawsuit.
Farnan will decide the verdict in the so-called bench trial, with no jury.
DUPED BY SCHREMPP?
Kerkorian's claim that he was duped by Schrempp could be partly undermined by the fact that he had a representative on the board of Chrysler with access to insider information at the time of the deal, however. And the deal might never have happened at all if Kerkorian and retired Chrysler Chairman Lee Iacocca hadn't launched a hostile takeover bid for Chrysler in 1995.
DaimlerChrysler Attorney Michael Schell has declined to comment on whether there were any negotiations over a possible settlement with Kerkorian. But he told Reuters on Wednesday closing arguments in the case, which are to be submitted in writing, probably won't be filed until sometime in late January. Rebuttals could then drag things into February.
"It isn't going to be over by Christmas. That I'm confident of," Schell said.
In addition to Schrempp, current and former executives ordered to appear and testify at the trial include DaimlerChrysler Chief Financial Officer Manfred Gentz and Robert Eaton, who was Chrysler's chairman when Schrempp clinched what he hailed as a "marriage made in heaven."
Eaton, once listed as co-CEO of the new DaimlerChrysler, took early retirement in 2000 and his chosen successor, James Holden, also due to appear at the trial, was replaced by former Daimler executive Dieter Zetsche as German managers took increasing control over the third-largest U.S. automaker.