German union boss denies insider trading accusations: Share deal in Daimler-Benz subsidiary that led to DM100,000 windfall was simple investment, says IG Metall leader

Click to follow
The Independent Online
FRANZ Steinkuhler, leader of Germany's most powerful union, IG Metall, yesterday found himself fending off embarrassing accusations of insider trading on the very day that he was claiming triumph in the eastern German engineering strike.

In a hastily called press conference at a luxury Frankfurt hotel, Mr Steinkuhler admitted having bought DM1m ( pounds 405,500) of shares in Mercedes-Benz shortly before an important announcement sent prices soaring, but denied any notion of insider information.

In his union capacity Mr Steinkuhler sits on the board of Daimler-Benz, one of several large corporations where he represents the workforce under Germany's co-operative social system.

The IG Metall leader said he bought the shares for himself and his young son Dominik in Mercedes Holding, a subsidiary of Daimler- Benz, between 18 March and 1 April. But he said he was unaware that Daimler-Benz was going to announce on 2 April a plan for swapping Mercedes Holding for Daimler shares, which sent the Mercedes stock rocketing by DM80 to DM570. He sold half his share packet, earning himself and Dominik more than DM100,000. The other half is still in the bank.

Mr Steinkuhler appeared to be taken aback by the suggestion that it might be unwise for Germany's best- known union boss to be speculating in such amounts at a time when many of his members are battling against recession. An IG Metall spokesman explained that Mr Steinkuhler did not own a house and that on a annual salary of DM200,000-300,000 he should have managed to put a few marks aside.

In a somewhat confused press conference Mr Steinkuhler said he only found out about the planned share swap on 2 April, and the share purchases had been a simple investment. The head of Daimler-Benz, Edzard Reuter, had told Stern magazine, which reported the deal, that the union leader could not have known of the share-swap plan beforehand.

Officials at the Frankfurt stock exchange have been investigating the events surrounding the Mercedes Holding-Daimler share swap because of suspicion of insider action. Insider trading is still not illegal in Germany, placing Frankfurt increasingly at odds with the world's major financial centres. Until now supervision has been on a gentleman's agreement basis, but a rash of scandals has exposed the weaknesses of Frankfurt's clubby style of operating.

The authorities are working on a new law to make insider trading a criminal offence, but its introduction is proving to be slow.