Volkswagen Ex-CEO Faces Fresh Fraud Charges Over Emissions Scandal -- Update

Date : 04/15/2019 @ 3:24PM
Source : Dow Jones News

Volkswagen Ex-CEO Faces Fresh Fraud Charges Over Emissions Scandal -- Update

By William Boston 

BERLIN--German prosecutors on Monday indicted Martin Winterkorn, the former chief executive of Volkswagen AG, and four other people on charges of serious fraud and a list of other violations in relation to the company's diesel cheating scandal.

The charges also include engaging in unfair competition, embezzlement, tax evasion and giving false witness. They carry substantial fines, the return of nearly EUR11 million ($12 million) in salary and bonuses and up to 10 years in prison, which makes the indictment among the most severe ever lodged against a corporate executive in Germany.

The indictment against Mr. Winterkorn alleges that he failed to act when he learned of the car maker's attempt to deceive regulators, consumers, and investors by selling millions of vehicles rigged to cheat on diesel-emissions tests. The charge could bolster a lawsuit against Volkswagen AG and Mr. Winterkorn filed by the U.S. Securities and Exchange Commission last month, claiming the company and its former CEO committed massive fraud against investors.

It could also give fresh ammunition to a class-action lawsuit in Germany where VW investors are seeking up to EUR9 billion in damages after VW shares lost nearly half their value when U.S. authorities in 2015 charged it with violating U.S. environmental law.

Felix Dörr, a prominent German attorney representing Mr. Winterkorn, declined to comment in detail, saying in a statement that Mr. Winterkorn hasn't had an opportunity to see the full indictment or all of the evidence.

Citing German privacy laws, the prosecutor didn't name the other defendants. The investigation focuses on individuals and their alleged involvement in crimes and doesn't involve Volkswagen as a corporation.

A Volkswagen spokesman said the company wouldn't comment on investigations against individuals. The criminal probe against Volkswagen ended last year when it agreed to settle the charges and pay a EUR1 billion fine.

The indictment comes nearly three years after prosecutors in Braunschweig, the jurisdiction where Volkswagen's headquarters are located, launched an investigation that is still ongoing and encompasses three dozen suspects. In the first interim conclusion of the investigation, the prosecutor said the charges against Mr. Winterkorn were particularly serious because he became aware of the cheating early on and did nothing to inform regulators and consumers.

"'As a result, Volkswagen AG suffered substantially higher financial penalties in Germany as well as in the U.S.," the prosecutor said in a statement.

Volkswagen pleaded guilty to the U.S. charges in 2016 and two former VW employees pleaded guilty to charges in the U.S. and are serving time in prison.

The German indictment covers allegedly illegal activities from Nov. 15, 2006 to Sept. 22, 2015. This is the time period from the decision to install illegal software on diesel engines until Volkswagen admitted in a regulatory statement to putting the software on nearly 11 million vehicles worldwide and acknowledged the U.S. investigation for the first time.

Volkswagen had been under pressure to boost sales in the U.S. and become the world's biggest auto maker by sales. However, a group of the company's executives and engineers discovered that their powerful diesel engines failed to meet strict U.S. emissions standards. The engineers devised a software workaround that allowed the vehicles to pass routine treadmill tests but relax emission controls during normal road usage.

In 2015, embroiled in scandal, Volkswagen sold more than 10 million vehicles worldwide, finally achieving its goal of becoming the biggest car maker in the world.

Mr. Winterkorn became CEO of Volkswagen in January 2007, moving from his role as CEO of VW's Audi luxury car unit. The Braunschweig indictment doesn't allege that he knew about the diesel cheating at this time, but that he learned about it on May 25, 2014.

Despite this knowledge, the prosecutors said in their statement, Mr. Winterkorn approved a EUR23 million diesel software update in November 2014 "that was useless and only served to continue to conceal the real reason for elevated emissions during normal use of the vehicle," the prosecutor said.

Max Bernhard contributed to this article.

Write to William Boston at william.boston@wsj.com

 

(END) Dow Jones Newswires

April 15, 2019 10:09 ET (14:09 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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