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German Government Sues Troubled Shipyard Alleging Misuse Of Funds

February 26, 1996

BREMEN, Germany (AP) _ Deepening the crisis at Germany’s largest shipbuilder, a government agency filed suit against the former management charging it fraudulently misdirected aid money earmarked for eastern German yards.

Monday’s announcement came as officials from Bremer Vulkan Verbund AG met creditor bank representatives and a court-appointed administrator to discuss how to avoid bankruptcy at the company.

Vulkan, which announced a 1995 loss of about 1 billion marks, or $684 million, filed for insolvency last week to gain legal protection from its creditors.

The result of an audit of the company’s books was ``worse than expected,″ Heinrich Hornef, head of the agency in charge of privatizing former East German companies, said Monday in Berlin.

The Bremen prosecutor’s office said Hornef’s agency filed a criminal complaint against the former Vulkan management citing ``suspicion of jointly misappropriating″ funds.

Hornef and the prosecutors did not name the managers.

Vulkan’s former managers improperly redirected 716 million marks, or $494 million in aid intended for the company’s shipyards in former East Germany to western German operations, Hornef said.

The funds were subsidies from the European Commission that the agency administered, agency officials said.

The European Union has demanded that Vulkan repay some 850 million marks the commission maintains were rerouted in this way.

Vulkan, based in the western German city of Bremen, bought shipyards in the east after German unification in 1990.

The company, which employs 23,000 workers, has been hurt by Asian competition and the strong German mark, which makes German products more expensive abroad.

Under the insolvency procedure, Vulkan will try to get its debt of about 1.6 billion marks, or $1.1 billion reduced or to win time to restore creditworthiness.

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