Volkswagen and SEC Are Told to Strike Deal on Fraud Lawsuit
August 16 2019 - 4:00PM
Dow Jones News
By Dave Michaels
A federal judge on Friday ordered Volkswagen AG and the
Securities and Exchange Commission to seek a settlement over
allegations the auto maker defrauded U.S. investors, rather than
continue an expensive legal fight.
U.S. District Judge Charles Breyer told the SEC and Volkswagen
to return as soon as Oct. 4 with an idea of how to resolve the
dispute, which could engender a battle over evidence on two
continents and whether the company should face liability for
securities fraud after settling similar claims with the U.S.
Justice Department.
"Whatever you work out today will be less expensive to everybody
than what you would work out in the future," Judge Breyer said at a
hearing Friday in San Francisco. The judge said the settlement
would be better for the SEC, which has "scarce resources."
Judge Breyer previously questioned why the SEC sued Volkswagen
years after other government agencies resolved their litigation
over the auto maker's diesel-cheating scandal. The judge in May
suggested the agency looked like a "carrion hawk" picking over the
remains of a crime.
The SEC's lawsuit, filed in March, centers on claims that
Volkswagen defrauded investors by selling billions of dollars of
bonds while making misleading statements about the environmental
impact of the company's "clean diesel" fleet. The SEC also sued
former Volkswagen chief executive Martin Winterkorn, who lives in
Germany.
The German auto maker paid a hefty price for rigging diesel
engines to pass U.S. emissions tests. Volkswagen pleaded guilty to
the charges in 2016 and has paid more than $25 billion in fines,
penalties and compensation to settle criminal and civil
litigation.
The SEC opened its investigation in 2015 and said Volkswagen
stalled the probe with long delays in producing documents and other
information, according to a court filing submitted last month. The
regulator tried to settle with Volkswagen years ago but was
excluded from the company's settlement talks with the U.S.
Department of Justice and other agencies, according to SEC court
filings.
Judge Breyer's latest instructions put pressure on the SEC to
resolve the lawsuit, perhaps by accepting a reduced penalty. The
judge said Friday that he didn't have an opinion on the case's
legal merits, but said "many aspects of the case have already been
settled years ago."
He added that his goal is "to get this thing resolved,"
especially since the SEC has "scarce resources."
An SEC spokesman didn't respond to a request for comment Friday.
A spokesman for Volkswagen declined to comment. An attorney for Mr.
Winterkorn declined to comment.
Judge Breyer, who handled the earlier litigation against the
auto maker, said any penalties that result from litigation would
likely be lowered to account for fines that Volkswagen already
paid. He didn't allow the SEC's lawyers or the company's attorneys
to make arguments in court Friday.
"On the one side of the ledger will be the fact that they have
paid...$25 billion," he said. "That is where I see the case
evolving if the SEC is correct in their allegations that there is
liability."
Write to Dave Michaels at dave.michaels@wsj.com
(END) Dow Jones Newswires
August 16, 2019 15:45 ET (19:45 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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