By WSJ Staff
The U.S. Securities and Exchange Commission said it charged Volkswagen AG, two of its units and former Chief Executive Martin Winterkorn with defrauding U.S. bond investors.
In a news release issued late Thursday, the SEC said the German auto maker raised billions of dollars through the corporate bond and fixed-income markets, while making a series of deceptive claims about the environmental impact of the company's "clean diesel" fleet.
The SEC said it alleges in its complaint that from April 2014 to May 2015 VW issued more than $13 billion in bonds and asset-backed securities in the U.S. markets at a time when senior executives knew that more than 500,000 vehicles in the U.S. grossly exceeded legal vehicle-emissions limits, exposing the company to massive financial and reputational harm.
The SEC's complaint alleges that Volkswagen made false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and VW's financial standing, the agency said.
VW on Friday called the complaint "legally and factually flawed" and said it would contest the charges "vigorously."
"The SEC has brought an unprecedented complaint over securities sold only to sophisticated investors who were not harmed and received all payments of interest and principal in full and on time," the company said in a statement.
VW's emissions cheating came to light in September 2015, when Volkswagen admitted some 11 million of its diesel vehicles world-wide were equipped with software that allowed them to sidestep emissions testing.
In late 2016, Volkswagen pleaded guilty to conspiracy to defraud the U.S. government over emissions levels for its diesel cars. The company also agreed to pay nearly $25 billion in fines, penalties and compensation after it settled a number of civil lawsuits. Two Volkswagen employees caught up in the scandal have faced charges in the U.S., with one sentenced to just over three years in prison.
The complaint alleges that VW, by concealing the emissions scheme, reaped hundreds of millions of dollars in benefits by issuing the securities at more-attractive rates for the company, the agency said.
The SEC said it charged VW, Mr. Winterkorn and subsidiaries Volkswagen Group of America Finance LLC and VW Credit Inc. with violating the antifraud provisions of the federal securities laws.
The SEC complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties, the SEC said. The complaint also seeks an officer and director bar against Mr. Winterkorn, the SEC said.
"Issuers availing themselves of American capital markets must provide investors with accurate and complete information," said Stephanie Avakian, co-director of the SEC's division of enforcement in the news release. "As we allege, Volkswagen hid its decadelong emissions scheme while it was selling billions of dollars of its bonds to investors at inflated prices."
The SEC's complaint was filed in the U.S. District Court for the Northern District of California, the SEC said.
(END) Dow Jones Newswires
March 15, 2019 03:25 ET (07:25 GMT)
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