US jury rules against Freightliner in fraud case

LOS ANGELES, Dec 17 (Reuters) A US court has ordered DaimlerChrysler AG and its heavy truck-making unit Freightliner LLC to pay more than 800 million dollar in a tangled multinational fraud case, The Oregonian newspaper said.

The decision by a Multnomah County Circuit Court jury followed a British court's 2005 decision against Freightliner, headquartered in Portland, Oregon.

Representatives of Freightliner and DaimlerChrysler could not immediately be reached for comment.

The 12-person jury on Friday found Freightliner liable for shifting assets among several of its divisions in a bid to avoid a legal judgment, the newspaper said yesterday.

Freightliner was ordered to pay at least 488 million dollar to German truck maker MAN AG.

Freightliner and its parent company, DaimlerChrysler North American Holding Corp., were also ordered to pay 350 million dollar in punitive damages -- an amount believed to be the largest such award ever in Oregon.

DaimlerChrysler, the world's largest maker of commercial trucks, was found liable for 280 million dollar of the punitive damages, with the remaining 70 million dollar assessed against Freightliner, the newspaper said.

Freightliner said it will appeal the verdict, the paper said.

The legal setback comes in the same week that DaimlerChrysler said it could lay off up to 4,000 Freightliner workers in North America next year in response to an expected 40-percent drop in orders for large trucks.

The case goes back to suspected accounting fraud in the 1990s at UK truck manufacturer ERF, now owned by MAN AG. MAN AG bought ERF in March 2000 from Western Star Holdings Ltd., a Canadian truck maker.

Western Star in turn was bought by Freightliner in late 2000.

The suspected accounting fraud stems from before Freightliner was associated with ERF, but MAN AG claims it did not discover the fraud until 2001.

MAN AG filed suit against Freightliner in a British court in 2002, a move that linked the truck company and its corporate parent to the case.

In 2005, a London judge found for MAN AG, and issued an interim award of 250 million British pounds -- about 488 million dollar at Friday's exchange rate.

The British court backed MAN AG's claim that ERF's financial controller had defrauded MAN AG through an accounting scam carried out over several years that went undetected by auditors.

MAN said in the earlier London trial that it bought ERF thinking it was a profitable company, but subsequently found it was loss-making.

REUTERS PDS BST0639