S.E.C. Accuses Volkswagen of Fraud in Diesel Scandal
(about 1 hour later)
The top securities agency in the United States has accused Volkswagen of undertaking a “massive fraud” and lying to investors, the latest in an ongoing diesel emissions scandal that has beleaguered the German carmaker.
The Securities and Exchange Commission said late Thursday that it was suing Volkswagen and Martin Winterkorn, its former chief executive, in a case related to a decade-long scheme undertaken by one of the world’s biggest carmakers to fudge its diesel emissions testing.
The agency is seeking to bar Mr. Winterkorn from being an executive director of any publicly listed company in the United States. It is also seeking to recover what it called “ill-gotten gains” from Volkswagen. Federal prosecutors criminally charged Mr. Winterkorn in 2018 with conspiring to hide the emissions cheating, elevating the scandal at the automaker to the very top of its management.
Volkswagen said in a statement that it had raised money from sophisticated investors who got back their principal and interest, and that the S.E.C. “is now piling on to try to extract more from the company.”
“The S.E.C.’s complaint is legally and factually flawed, and Volkswagen will contest it vigorously,” the statement read.
Mr. Winterkorn has denied wrongdoing in the past, including in testimony in front of the German Parliament. Steven Molo, Mr. Winterkorn’s lawyer, did not immediately respond to a request for comment.
In the automaker’s most recent annual report, it flagged the possibility of a lawsuit and said that the S.E.C. had requested information related to potential violations of securities laws.
It entered into a $14.7 billion settlement to settle shareholder claims arising from the diesel cheating scandal. It was the biggest consumer class-action settlement in the United States at the time.
Volkswagen acknowledged in 2015 that it had placed illegal software in 11 million cars around the world that could help them cheat on pollution tests.
While it cheated on those tests, it raised money from American investors. Between April 2014 and May 2015, Volkswagen raised more than $13 billion from American investors in the bond and securities markets, even as top management knew that hundreds of thousands of its diesel vehicles exceeded vehicle emissions limits by a large margin, the S.E.C. said in its complaint, which was filed in San Francisco.
Mr. Winterkorn and other Volkswagen executives were told about devices that were being used to conceal emissions problems as early as November 2007, at a meeting with engineers about problems with the carmakers “clean diesel” cars, the regulator said in its complaint.
“Although at least one meeting participant warned that putting the existing vehicles on the road in the U.S. would damage VW’s reputation if the vehicles’ high emissions were later discovered, those concerns were ignored,” the S.E.C. said in its complaint.
By lying, Volkswagen was about to reap hundreds of millions of dollars from investors on more favorable terms for the company, it said.
Volkswagen made “false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and VW’s financial standing,” the S.E.C. said on Thursday.