Vodafone chief in payments inquiry

One of Britain's best known businessmen is under investigation over multi-million pound payments to top executives at a German company after it was taken over by his Vodafone group.

Sir Christopher Gent, chief executive of the world's largest mobile phone operator, is one of 10 people named by public prosecutors in Dusseldorf looking at payments totalling DM120m (£40m) to Mannesmann board members. Some £20m went to the then chief executive Klaus Esser as a severance payment and a similar amount was shared by a number of other directors. The prosecutors are investigating whether the payments were related to the board's decision to accept Vodafone's takeover terms which until then had been furiously resisted by Mannesmann executives.

The Dusseldorf prosecutor's office, which has been investigating the takeover since March, said it was "looking into concerns that in both cases the payments were made without sufficient legal justification, at least to a significant degree".

Last night Vodafone rejected any suggestion of wrongdoing. A spokesman said: "We carried out a very detailed investigation when the allegations first appeared, using a firm of German lawyers. They went through everything with a fine tooth comb and could not find anything untoward."

Also under investigation are Mr Esser, Klaus Zwickel, head of Germany's powerful IG Metall union, and Josef Ackermann, head of the investment banking arm of Deutsche Bank and the man lined up to take over the running of Germany's largest bank next year.

Mr Zwickel and Mr Ackermann were both members of the supervisory board of Mannesmann at the time of the bid. Other members of the supervisory board have also been named by prosecutors.

Under Germany's two-tiered board structure, members of the supervisory board oversee the work of the executive directors who are in charge of day to day management. Last night Deutsche Bank and IG Metall declined to comment.

Vodafone caused a furore in Germany when it launched its hostile £120bn bid, the largest in European history. Such corporate raids, familiar in the US and the UK, were almost unknown in Germany. The battle for Mannesmann, a telecommunications and engineering group based in Dusseldorf, was keenly contested and the German giant only capitulated after failing to secure an alliance with French media group Vivendi.

Prosecutors began looking at the severance payment to Mr Esser after two German lawyers claimed the money was a payoff to persuade him to drop his opposition to the bid. Initially the investigation centred on those who received the payments but has since been widened.

"The investigation into possible breach of trust or aiding and abetting breach of trust will not only involve recipients of payments at management board level but also those persons who set the payments as part of their functions on the supervisory board of the Mannesmann group," the prosecutors' office said yesterday.

Sir Christopher could face questions about the payments from a tiny rump of Mannesmann shareholders. Though Vodafone owns the company, under German law shareholders cannot be forced to sell out in a bid situation. As a result there is still 0.8% of Mannesmann in private hands and Vodafone is obliged to hold an annual meeting of Mannesmann shareholders tomorrow.

Last year Sir Christopher was criticised for not attending the meeting - which is held in Dusseldorf and conducted in German - and as a result he will be there tomorrow.