VOW3 Volkswagen AG

By Dave Michaels 

WASHINGTON -- Volkswagen AG dragged out a federal investigation into whether it defrauded U.S. bond investors by omitting details about its efforts to cheat on diesel-emissions tests, according to the government.

The Securities and Exchange Commission, in a Monday federal court filing, explained why it took so long to sue Volkswagen and its former chief executive officer after the auto maker pleaded guilty in 2017 to criminal charges over the diesel-cheating scandal. In May, a federal judge in San Francisco questioned the SEC over the delay and said he was "totally mystified" by the regulator's move.

Representatives for VW didn't immediately respond to requests for comment.

The SEC said its probe began in September 2015 and struggled with "long delays by VW in producing documents and other information, uncooperative witnesses who were reluctant or altogether refused to speak to the staff and efforts (with mixed success) to navigate cumbersome procedures for collecting evidence located abroad."

The agency's filing provides a rare, detailed timeline of one of its enforcement investigations, which examined Volkswagen's sale of $13 billion in bonds in the U.S. from April 2014 to May 2015. The SEC claims senior executives knew more than 500,000 vehicles in the U.S. grossly exceeded legal emissions limits during that period.

The SEC said Volkswagen's costs of funding would have been higher if the company had disclosed the burgeoning legal risks to purchasers of its debt.

In its March civil lawsuit, the SEC said former CEO Martin Winterkorn heard about a emissions-cheating device from two engineers in November 2007.

The SEC said it first sought a settlement with Volkswagen in mid-2016, but the company excluded it from settlement talks with the Justice Department and other agencies.

"VW's counsel informed DOJ and the [SEC] staff that VW viewed the SEC's securities investigation differently than the other government investigations," the SEC wrote.

The SEC said it encountered obstacles abroad too. The German financial regulator, the Federal Financial Supervisory Authority, rejected the SEC's request for help obtaining documents and interviews of key witnesses. The SEC wrote that it then asked the Justice Department for its assistance in arranging interviews but that it also turned the agency down.

Volkswagen was slow to produce documents that identified employees and officers involved in its bond offerings, the SEC said. The company sent the SEC millions of pages of requested documents but didn't include a spreadsheet that listed the names of employees involved in preparing its bond disclosures, according to the SEC.

U.S. District Judge Charles Breyer ordered the SEC in May to make the filings it produced Monday.

The material includes a 113-page statement from an SEC supervisor in Chicago, Jeffrey Shank, that explains when the SEC discovered each factual claim in its lawsuit.

Write to Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

July 08, 2019 19:17 ET (23:17 GMT)

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