Oregon Appeals Freightliner Fraud Settlement

Posted on June 29, 2007

The state of Oregon is appealing a $500 million fraud settlement between truck maker Freightliner, its parent DaimlerChrysler and MAN AG because it excludes punitive damages in which the state would have a stake.

The convoluted case goes back to suspected accounting fraud in the 1990s at U.K. truck manufacturer ERF, which was bought by Germany's MAN in March 2000 from Western Star Holdings Ltd., a Canadian truck maker. Western Star was in turn bought by Freightliner in late 2000. Late last year, the court ordered Portland-based Freightliner to pay MAN at least $488 million and, with DaimlerChrysler, an additional $350 million in punitive damages -- an amount believed to be the largest such award ever in Oregon.

But the parties struck a new deal in late May that excluded punitive damages, and Judge Kathleen Dailey approved that deal on June 7. Oregon law directs 60% of any punitive damages awarded in the state to victims services programs. Oregon solicitor general Mary Williams put the state's share of the original judgment at $210 million. "We do have an interest in these punitive damages," she told Reuters. "You cannot simply exclude the state in the settlement negotiations."