Updated from 4:40 p.m. ET
Tracinda, a company owned by financier Kirk Kerkorian, is suing
and its top executives, including Chairman and Chief Executive Juergen Schrempp, alleging that they "fraudulently" induced Chrysler shareholders to vote for the 1998 deal that created the company, which was billed as a merger of equals.
Tracinda, DaimlerChrysler's third largest shareholder, is seeking more than $2 billion in actual damages, $1 billion for the drop in value of DaimlerChrysler shares exchanged for Tracinda's Chrysler stock, and at least $6 billion "to punish the defendents for defrauding all Chrysler shareholders and the investing public at large."
The suit asserts that DaimlerChrysler's stock slide is due primarily to mismanagement by Schrempp and his team of German executives. The company's shares have lost about two-thirds of their value since reaching a high of $108 in January 1999.
Shares of the company closed up $1.02, or 2.5%, to $41.25 in
New York Stock Exchange
The lawsuit also cited an Oct. 30 report by the
, in which Schrempp was quoted as saying he "always intended to control Chrysler and operate it as a division," but that he "concealed" his "true intentions" in order to close the deal with Chrysler.
Tracinda's suit, which the company expects to file on Monday afternoon in U.S. District Court in Delaware, also seeks to break up DaimlerChrysler and return Chrysler to its former shareholders.
DaimlerChrysler later released a statement saying that while it hadn't seen the lawsuit, "based on the statement made by Tracinda, the allegations appear to be completely without merit."
Germany's Daimler-Benz AG acquired Chrysler in 1998. The company, which is facing financial problems from its Chrysler unit, recently dismissed several members of Chrysler's brass, including James Holden, the head of the U.S. group, and replaced them with German executives.