Fired head of German firm's U.S. division sues

March 04, 1994|By Bloomberg Business News

Metallgesellschaft AG's former head of U.S. refining and marketing filed a $500 million lawsuit in Baltimore federal court alleging he was wrongly fired in the wake of oil-trading losses last year.

The suit by Arthur Benson, who was dismissed Feb. 4, also includes accusations of libel, slander and defamation in connection with statements by executives of the German mining and metals company that he breached his duty.

Mr. Benson charged that he was held "personally responsible for losses" totaling about $1 billion at Metallgesellschaft and the company's principal U.S. unit, Metallgesellschaft Corp., based in New York.

Those losses contributed to Metallgesellschaft's near-collapse last year. Its creditor banks bailed out the Frankfurt-based company by agreeing to a $2 billion rescue package, approved by shareholders last month.

In the suit filed Monday, Mr. Benson said the company and its directors ignored a trading strategy he proposed that would have raised hundreds of millions of dollars. If it had been implemented, the suit said, "there never would have been a near collapse of Metallgesellschaft."

Last December, Mr. Benson was removed as president of MG Refining & Marketing Inc., a subsidiary of MG Corp. The move was made after the parent company said it faced losses of about $857 million on MG Corp.'s oil trades.

At the time of his February dismissal, Metallgesellschaft said he was fired "for cause." It didn't specify a reason.

Metallgesellschaft, MG Corp. and MG Refining & Marketing are all named as defendants in the suit, filed in U.S. District Court in Maryland, along with Deutsche Bank AG and Deutsche Bank of North America. Deutsche Bank is one of Metallgesellschaft's largest shareholders and helped put together the rescue package.

A spokesman for MG Corp. said the suit was "totally without merit." Citing the company's plans to respond in court, he declined to be more specific.

Deutsche Bank AG officials couldn't be reached for comment, while an outside spokesman for Deutsche Bank North America declined to comment.

Mr. Benson couldn't be reached for comment.

In the suit, Mr. Benson said he had devised a strategy to generate cash by selling "puts," or options to sell, petroleum products at a specific price. That would have freed some cash Metallgesellschaft had in margin accounts and allowed the company to maintain its oil-trading positions.

The strategy was approved by Metallgesellschaft's former chief executive, Heinz Schimmelbusch, and other executives at a meeting in Germany on Dec. 5, according to the lawsuit.

Last month, MG Corp. named Ronald H. Rodgers, formerly of Delphi Petroleum in Shrewsbury, N.J., to succeed Mr. Benson.

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