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Tuesday, 21 August, 2001, 16:38 GMT 17:38 UK
Vodafone hits back at bonus claims
Former Mannesmann boss Klaus Esser in November 1999, after rejecting Vodafone's initial approach
Klaus Esser: Given severance pay of 60m Deutschmarks
Mobile phone giant Vodafone has hit back at claims that bonuses paid to directors at rival Mannesmann were designed to smooth last year's difficult takeover of the German firm.

Vodafone, which is being investigated by German prosecutors over the allegations, said the payments, totalling 120m Deutschmarks ($56m; 39m), were legally awarded.

"We have had German lawyers look at the proceedings and we have been advised everything was done in line with German law," a company spokeswoman said.

And the company is believed to be insisting that it had no contact, direct or indirect, with Mannesmann directors until they had agreed to back the 180bn euro ($164bn; 113bn) merger, the Financial Times said.

Vodafone claims it had no choice but to pay out bonuses agreed by Mannesmann directors once it became clear the deal would go through, the newspaper said.

The comments helped steer Vodafone shares further clear of the 127.5p level hit on Friday, the stock's lowest closing low since October 1998.

Vodafone stock climbed 5p to 133p on Tuesday.

Bitter battle

The bonus allegations concern Vodafone's takeover of Mannesmann, which board members at the German firm agreed to in February, ending a bitter battle to see off the bid.

German prosecutors are investigating whether there is sufficient evidence to level formal charges over claims that the bonuses, which included a 60m DM award to Mannesmann's then-chief executive Klaus Esser, were used as a sweetener to the bid.

Hong Kong conglomerate Hutchison Whampoa briefly owned part of Mannesmann, before selling out to Vodafone.

"It was money paid by the Hutchison management to reward the Mannesmann management [for prior performance]," Financial Times Deutschland editor-in-chief Kristof Keese told the BBC's World Business Report.

"What German investigators now think is that the entire thing had something to do with the Vodafone deal. It is under scrutiny because investigators believe the money was only technically paid by Hutchison but in fact came from Vodafone," he said.

Executives under investigation include Mr Esser, newly-knighted Vodafone boss Sir Chris Gent, and Klaus Zwickel, head of union IG Metall.

IG Metall has rejected the accusations levelled against Mr Zwickel.

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Kristof Keese, Financial Times Deutschland editor
"Investigators believe the money was only technically paid by Hutchison"
See also:

20 Aug 01 | Business
Vodafone chief under investigation
25 Jul 01 | Business
Vodafone to review pay deal
11 Jul 01 | Business
Germany to curb hostile takeovers
15 Jun 01 | Business
Gent heads business honours
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