updated 12/2/2003 6:33:22 PM ET 2003-12-02T23:33:22

Daimler-Benz executives engaged in “plain, old fashioned fraud” during merger talks with Chrysler five years ago, an attorney representing billionaire investor Kirk Kerkorian told a federal judge Monday.

“Because of the lies, defendants were able to take over Chrysler, drive out the senior leaders at Chrysler and replace them with Daimler executives from Germany,” Terry Christensen, who represents Kerkorian’s Tracinda Corp., said during opening arguments in U.S. District Court.

The trial that began Monday is the culmination of a three-year battle between Tracinda and German-American automaker DaimlerChrysler AG. Tracinda is seeking $1 billion in compensatory damages and an unspecified amount of punitive damages.

DaimlerChrysler says the 1998 merger was one between equals, a trans-Atlantic union that created a global automotive giant. Tracinda claims the deal was a veiled takeover, orchestrated to bilk shareholders out of billions in compensation.

“DaimlerChrysler AG is a merger of equals, and it always has been,” Jonathan Lerner, an attorney for the automaker, said in his opening argument.

He said Kerkorian always knew what was going on with the company and with changes in the staff, but didn’t do anything until the price of his stock began falling.

“This case is about DaimlerChrysler’s sagging stock price and a major investor who sat on his stock too long,” Lerner said.

The trial will feature testimony from the reclusive Kerkorian and top executives of DaimlerChrysler, including chairman Jurgen Schrempp. Also set to testify is former Chrysler Corp. chairman Robert Eaton, a central figure in the deal’s negotiations.

The trial is expected to last about two weeks.

Kerkorian, who was not present in court Monday, sued DaimlerChrysler in 2000 after the London-based Financial Times quoted Schrempp as saying he never meant for the 1998 merger to be one of equals, and that the deal was billed that way “for psychological reasons.”

Chrysler shareholders, including Kerkorian, claim they were duped into approving the so-called merger when in reality Daimler-Benz was acquiring Chrysler.

Kerkorian, whose Tracinda investment arm once held 14 percent of Chrysler’s stock, says Schrempp, then Daimler-Benz chairman, and other company officials misled shareholders to cheat them out of an acquisition fee that would have been due had Chrysler been purchased.

Last week, U.S. District Judge Joseph J. Farnan Jr. rejected DaimlerChrysler’s final attempts to have the case dismissed, saying evidence suggests the deal was a covert takeover from the outset.

“Tracinda’s evidence demonstrates that defendants mounted a full-scale communications campaign aimed at concealing their intent to take control of Chrysler and pressing the ’merger of equals’ concept,” Farnan said in a ruling.

In August, DaimlerChrysler agreed to pay $300 million to settle a similar class-action lawsuit filed by other investors who claimed they were misled about the deal. At the time, the automaker said it believed the suit seeking $22 billion was groundless, but it agreed to the settlement “since a local jury could reach a different conclusion.” That settlement had no bearing on the Kerkorian case.

Some observers have estimated a judgment for Kerkorian could amount to $3 billion to $4 billion.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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