Ex-Swissair Group CEO Mario Corti testified that he didn't mislead shareholders in April 2001, six months before the company collapsed, when he said the airline had secured extra credit to rescue the carrier.
Corti said at the company's last general assembly on April 25, 2001, that it had an agreement with Citibank, Credit Suisse First Boston and Deutsche Bank AG for a credit facility of 1 billion Swiss francs ($800 million). Corti told the Swiss court yesterday that he had been given the „green light” by Chief Financial Officer Georges Schorderet before the meeting. The state attorney has charged Corti with false reporting, saying the contract hadn't been signed and the terms of the credit facility were still being negotiated at the time of the shareholder meeting.
The final contract was only signed on July 11 with „restrictive” terms, the district judge said. „I take full responsibility for my statement,” Corti told the court in Buelach, near Zurich, pleading not guilty to the charge. „I said what I had understood as right and correct according to my knowledge.” A credit facility is negotiated in several steps and at the time of the meeting the company had received a signed fax by the three banks, Corti said.
„It's key that we had the banks' confidence,” he said, adding that a credit facility always has conditions. Corti, whose comments were in response to questions from the district judge, declined to answer the state attorney's questions.
The district judge's questioning was „fair,” Corti said in an interview after this morning's session, declining to comment further. Corti, previously chief financial officer of Nestle SA and a board member of Swissair Group, took over as CEO in March 2001 after agreeing to an up-front payment of 12 million Swiss francs.
Schorderet, who pleaded not guilty to the charge of false reporting, declined to answer questions from the district judge or the state attorney. The trial is the first time that members of a board of directors have faced criminal charges for corporate failure in Switzerland. Swissair, replaced by Swiss International Air Lines Ltd., collapsed October 2, 2001, after running out of cash.
The state attorney also charged Corti with false reporting in his statements about the financing in May and June 2001 of the company's French airline unit AOM/Air Liberte, which it co-owned with Taitbout Antibes BV. The state attorney alleged that Corti knowingly made an untrue statement at the shareholders' meeting on April 25 when he said an agreement had been reached with Taitbout and that Taitbout would make a „direct payment” to cover half of the 500 million French francs ($99 million) needed to keep the French airline unit operating. „I never used the word direct payment.
I said that we, the Swissair Group, would make a last cash injection for May and June,” he told the district judge. „I also said that Taitbout would cooperate in the financing effort.” Corti said „financing effort” referred to the agreement that Taitbout would give up its right to 45% of a put option contract, or 225 million French francs. Under the terms of that contract, Swissair was due to pay Taitbout 500 million French francs by 2004.
The charge of false reporting also relates to a cost-cutting program called „Change 2001.” In a press release published in German on June 21 and authorized by Corti, Swissair Group said it „will cut costs in the second half by at least 500 million Swiss francs,” according to the state attorney.
The state attorney also claimed that when Change 2001 was announced it gave investors the false impression that these savings were possible.”When you announce a cost-cutting program you always give a goal and not a result,” Corti said, adding that savings of 500 million Swiss francs for a company with yearly sales of 17 billion Swiss francs weren't unreasonable.
He also said he couldn't double-check every press release in every language and that the English version was more accurate as it said „should” achieve savings of 500 million Swiss francs, rather than the German version, which said „werden,” or „will.” The state attorney also charged Corti with false reporting in connection with Air Littoral SA, 49.5% of which was owned by Swissair Group. Corti again pleaded not guilty. The trial is due to last until March 9. (Bloomberg)