Deutsche Telekom faces mountain of lawsuits

An unprecedented legal event began Tuesday in Frankfurt with about 15,000 shareholders suing Deutsche Telekom AG for allegedly inflating the value of assets in three separate share placements.

The shareholders filed a total of 2,100 cases related to the matter. Judge Meinrad Wösthoff of the Frankfurt regional court and his colleagues normally handle that many cases in a decade, according to the court.

The shareholders, many of them customers of Deutsche Telekom who believed their money would be safe in Europe's largest telecommunications company, claim the operator inflated the value of its real estate, consisting of more than 35,000 buildings and plots of land, in placements made through 2000.

After watching the price of what was once dubbed the "people's share" plummet in the late 90s, many of these mom-and-pop investors were again affected when Deutsche Telekom wrote down the value of its real estate holdings at the beginning of 2001.

Now 15,000 of them want their money back. They've instructed nearly 750 law firms to file 2,100 separate claims, seeking about Euro 100 million (US$130 million) in compensation, according to the Frankfurt court.

The plaintiffs are suing many of the parties involved in the privatization, including Deutsche Telekom itself, its former Chief Executive Officer Ron Sommer, the government and even some of the underwriting banks.

Because Germany, unlike the U.S., has no procedure for filing class-action suits, Judge Wösthoff plans to rule on 10 claims covering all issues, and then use these verdicts to guide decisions in the remaining suits.

Deutsche Telekom's stock dropped sharply along with shares of other big telecommunications companies, such as France Télécom SA, when the German operator accumulated billions of euros in debt through expansion in the late 1990s and then saw global stock markets plunge at the turn of the century.

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