undone deal

Oligarch Can Sue Ex-RWE Boss

grossmann_laif
Jürgen Grossmann has been left to reflect on the deal.
  • Why it matters

    Why it matters

    The decision to allow a case against Jürgen Grossmann and not his former employer RWE is a surprise.

  • Facts

    Facts

    • Sintez, owned by oligarch Leonid Lebedev, is one of Russia’s largest privately run companies.
    • It planned to buy a Russian electricity producer in a joint venture with RWE.
    • Sintez was left high and dry when RWE pulled out of the deal in 2008 blaming the financial crisis.
  • Audio

    Audio

  • Pdf

Once a year, self-made German billionaire Jürgen Grossmann invites car aficionados and friends to his “Classic Cars & Cuisine Culinaire.” The non-competitive road rally combines vintage cars and good food. The endpoint of the excursion is usually Mr. Grossmann’s three-star restaurant in the northwestern German city of Osnabrück. His steel-manufacturing company, Georgsmarienhütte, is nearby.

Mr. Grossmann, 63, also invites business partners. In 2008, 80 cars traveled from Bremen to Osnabrück. Russian oligarch Leonid Lebedev, 58, was among the participants.

At the time, Mr. Grossmann was chief executive of RWE, Germany’s largest utility company. It was working with Mr. Lebedev’s Sintez Group, one of Russia’s biggest privately owned firms, on the acquisition of a Russian electricity producer.

Sintez accuses the Germans of having withdrawn 'unexpectedly and for no plausible reasons.'

But little did either know at the time that the meeting would later form part of the evidence for a €900 million ($988 million) damages claim by Mr. Lebedev following the collapse of the RWE-Sintez venture in 2008.

The case has been going through the courts for some time and on Tuesday the district court in Essen in northwestern Germany ruled that Sintez could pursue a damages claim against Mr. Grossmann himself, but not RWE. Mr. Grossmann alone had not been targeted in the original claim.

The vintage rally forms an interesting backdrop to the case. Mr. Lebedev alleges Mr. Grossmann was concerned with “establishing a personal contact.” “I had no doubt that I could trust his word,” he has said.

Mr. Lebedev had put his faith in Mr. Grossmann with regards to the RWE-Sintez deal. Mr. Grossmann had taken over as chief executive of RWE in 2007 and was involved in restructuring the energy company.

 

019 RWE-01 new version

 

The background to the case is complex. In February 2008, RWE had received an offer from Russia. Rustenburg, a subsidiary of the Sintez Group, hoped to acquire the electricity producer TGK-2 as part of a joint venture with RWE. It was agreed that Sintez would purchase the shares and RWE would subsequently take over 51 percent in a joint venture. On March 14, 2008, Mr. Grossmann announced in an internal e-mail: “This is a milestone in our development.”

But shortly after the vintage-car rally later that year, Mr. Lebedev and Mr. Grossmann fell out. The German backed out of the deal. RWE claims their Russian partner kept making increasingly tough demands. Sintez accuses the Germans of having withdrawn “unexpectedly and for no plausible reasons.”

Mr. Grossmann conclusively canceled the project on September 15, 2008, the day Lehman Brothers went bankrupt. Suddenly Mr. Lebedev was left alone with all his plans ― and debts. He alleges RWE and Mr. Grossmann almost ruined him.

More than six years after the collapsed deal and the failure of a lawsuit against RWE in a London arbitration court, Mr. Lebedev is no doubt relieved to have won a first victory. Even so, he says that he plans to appeal the RWE decision.

An RWE spokeswoman said: “The court confirmed our position; we consider the plaintiff’s arguments to be implausible.”

 

Volker Votsmeier is an investigative reporter at Handelsblatt, Jürgen Flauger covers the energy industry for the paper. To contact the authors: flauger@handelsblatt.com, votsmeier@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!