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Chrysler creditors sue Daimler, claim fraud

Posted Wednesday, Aug 19, 2009, 12:28 pm in Employee News

Creditors of Chrysler LLC are suing Daimler AG, accusing it of fraudulently stripping the U.S. automaker of “billions of dollars in assets” prior to its 2007 sale of the U.S. carmaker to private equity firm Cerberus Capital Management LP, Reuters reported.

That alleged fraud left Chrysler’s unsecured creditors “unable to look to these assets to satisfy their claims,” they alleged in a suit filed on Monday in federal bankruptcy court in Manhattan, the story said. The creditors won permission last week from U.S. Bankruptcy Judge Arthur Gonzalez to file the suit. A spokesman for Daimler said at the time that the action was without merit, Reuters said.

In court documents filed last week, Daimler said it had “nurtured” Chrysler for nine years before selling control to Cerberus at a “steep loss” in a deal that included Daimler forgiving Chrysler’s intercompany debt of $2 billion, the story said. The creditors claim that Daimler knew in 2006 that its merger with Chrysler was a failure, and that realizing the extent of Chrysler’s debts, Stuttgart, Germany-based Daimler decided to cut its links to avoid being saddled with Chrysler’s billions of dollars in obligations, the news service said.

The creditors accused Daimler of engineering the “fraudulent transfers” of the Chrysler assets and are seeking damages to be determined in a jury trial, the story said. (Reuters)
 
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