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2 Top VW Executives and Ex-C.E.O. Charged With Market Manipulation 2 Top VW Executives and Ex-C.E.O. Charged With Market Manipulation
(about 2 hours later)
FRANKFURT — German prosecutors on Tuesday charged Volkswagen’s two highest-ranking executives and a former chief executive with stock market manipulation for not alerting shareholders when they learned authorities were investigating the company’s diesel emissions.FRANKFURT — German prosecutors on Tuesday charged Volkswagen’s two highest-ranking executives and a former chief executive with stock market manipulation for not alerting shareholders when they learned authorities were investigating the company’s diesel emissions.
Hans Dieter Pötsch, the chairman of Volkswagen’s supervisory board; Herbert Diess, the chief executive; and Martin Winterkorn, a former chief executive, are accused of failing to inform stockholders of an investigation in the United States that led to charges of emissions cheating. Separately, Daimler said it agreed to pay a fine of 870 million euros, or $957 million, in Germany for selling Mercedes-Benz diesel cars that polluted more than allowed.
The legal actions were a further blow to the image of the German carmakers when the industry is struggling with declining sales and a costly transition to electric vehicles. In Volkswagen’s case, the charges filed by prosecutors in Braunschweig, Germany, are a serious distraction as the company tries to refashion itself as a climate-friendly manufacturer of affordable electric cars.
Hans Dieter Pötsch, the chairman of Volkswagen’s supervisory board; Herbert Diess, the chief executive; and Martin Winterkorn, a former chief executive, are accused of failing to inform stockholders of an investigation in the United States that led to charges of emissions cheating. If convicted, they could be sentenced to up to five years in prison.
Volkswagen shareholders did not learn of the cheating until the Environmental Protection Agency issued a notice of violation in September 2015. Volkswagen’s share price fell by almost half and the cost of the scandal has since topped $30 billion in court settlements and fines.Volkswagen shareholders did not learn of the cheating until the Environmental Protection Agency issued a notice of violation in September 2015. Volkswagen’s share price fell by almost half and the cost of the scandal has since topped $30 billion in court settlements and fines.
All three of the accused men issued statements denying accusations that they violated their duty under German law to warn shareholders of events that could affect the stock price.All three of the accused men issued statements denying accusations that they violated their duty under German law to warn shareholders of events that could affect the stock price.
The allegations are a particular blow to Mr. Diess, a former BMW executive who arrived only months before the cheating became public. Mr. Diess has been trying to restore Volkswagen’s image by remaking the authoritarian, win-at-all costs company culture that helped foster the scandal. The allegations are a particular blow to Mr. Diess, a former BMW executive who arrived only months before the E.P.A. publicly accused Volkswagen of cheating. Mr. Diess has been trying to restore Volkswagen’s image by changing the authoritarian, win-at-all costs company culture that helped foster the scandal.
“Neither the facts nor the law justify the charges,” lawyers for Mr. Diess said in a statement. “Newly arrived in July 2015, Dr. Diess was not in any position to foresee the magnitude of the economic consequences actually resulting from the diesel emissions fraud.”“Neither the facts nor the law justify the charges,” lawyers for Mr. Diess said in a statement. “Newly arrived in July 2015, Dr. Diess was not in any position to foresee the magnitude of the economic consequences actually resulting from the diesel emissions fraud.”
Mr. Diess “will continue to carry out his duties in the company with absolute commitment,” the statement said.Mr. Diess “will continue to carry out his duties in the company with absolute commitment,” the statement said.
The charges also put pressure on Mr. Pötsch, who was chief financial officer at the time that the scandal came to light in 2015 and was responsible for communicating with shareholders. As supervisory board chairman, Mr. Pötsch oversees senior management and presides over the annual shareholders meeting.
“The indictment against Mr. Pötsch is unfounded,” lawyers for Mr. Pötsch said in a statement. “In the summer of 2015, no obligation to inform the capital market arose at any time even from a purely capital market law perspective.”
Mr. Winterkorn’s lawyers said in a statement that he had trusted assurances from Volkswagen employees that excess emissions in diesel cars were the result of a technical problem, which could be worked out with regulators in the United States.
Volkswagen later admitted it had programmed the vehicles to recognize when an emissions test was underway and to crank up pollution controls so the cars were deemed compliant. During on-the road driving the cars polluted far more than allowed.
Mr. Winterkorn “had no prior knowledge of the intentional use of forbidden motor management software in diesel passengers cars in the U.S.,” the statement said. Mr. Winterkorn already faces fraud charges in connection with the emissions cheating, which he has denied.
The charges come only weeks after Volkswagen unveiled a four-door hatchback, the ID.3, that the company said would be the first of a line of moderately priced electric vehicles, making emission-free transportation accessible to middle-class buyers.
Hiltrud Dorothea Werner, a member of Volkswagen’s management board responsible for instilling a stronger sense of ethics, said on Tuesday that the charges were unfounded. The case could also have financial consequences for Volkswagen. Shareholders have sued, seeking damages the could reach $10 billion.
“The company has meticulously investigated this matter with the help of internal and external legal experts for almost four years,” Ms. Werner said in a statement. “The result is clear: The allegations are groundless.”
Prosecutors had previously disclosed that they were investigating the three executives. Volkswagen has pleaded guilty to charges in the United States stemming from the emissions deception.