By William Boston
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 16, 2019).
German prosecutors charged former Volkswagen AG Chief Executive
Martin Winterkorn and four others with fraud relating to emissions
cheating, dealing a blow to the car maker's efforts to move past
the scandal.
In an indictment made public Monday, the individuals were also
accused of engaging in unfair competition, embezzlement, tax
evasion and giving false witness. The charges could result in
substantial fines, the return of nearly EUR11 million ($12 million)
in salary and bonuses and as much as 10 years in prison, making the
indictment among the most severe lodged against an executive in
Germany.
The charges represent the latest fallout from the
emissions-cheating scandal, which first surfaced in 2015 when U.S.
authorities charged Volkswagen with violating environmental law.
Since then the company has faced multiple investigations and paid
more than $25 billion in fines, penalties and compensation to
settle criminal and civil litigation.
With criminal litigation against the company settled in most
places, prosecutors are now targeting individual employees. Mr.
Winterkorn and several other former executives have already been
indicted on similar allegations in the U.S. but those charges might
not move forward because Germany doesn't extradite its citizens for
prosecution in a foreign country, making it unlikely Mr. Winterkorn
will stand trial in the U.S.
The central allegation of the German indictment against Mr.
Winterkorn, who stepped down in 2015, is that he failed to act
after learning about Volkswagen's efforts to deceive regulators,
consumers and investors by selling millions of vehicles rigged to
cheat on diesel-emissions tests.
While Monday's charges are aimed at individuals, rather than the
company, the indictment could bolster other lawsuits against
Volkswagen.
Those include a claim by the U.S. Securities and Exchange
Commission made last month that the company and its former CEO
defrauded investors. It could also give fresh ammunition to a
class-action lawsuit in Germany, where Volkswagen investors are
seeking as much as EUR9 billion in damages because of the fall in
the company's share price after the U.S. probe become public in
2015.
Felix Dörr, a German attorney representing Mr. Winterkorn,
declined to comment in detail, saying in a written statement that
Mr. Winterkorn hasn't had an opportunity to see the full indictment
or all of the evidence.
Prosecutors didn't name the other defendants, citing German
privacy laws.
A spokesman for Volkswagen said the company wouldn't comment on
investigations against individuals. The German criminal probe
against Volkswagen ended last year, when it agreed to settle the
charges and pay a EUR1 billion fine.
Monday's indictment comes nearly three years after prosecutors
in Braunschweig, the jurisdiction where Volkswagen's headquarters
are located, launched their investigation. The probe continues 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 written statement.
Volkswagen pleaded guilty to U.S. charges in 2016. Separately,
two former employees pleaded guilty to U.S. charges and are serving
time in prison.
The German indictment covers alleged illegal activities from
Nov. 15, 2006, to Sept. 22, 2015. The period spans the time 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 world-wide and acknowledged
the U.S. investigation for the first time.
During that period, 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 globally, 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 German
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.
Write to William Boston at william.boston@wsj.com
(END) Dow Jones Newswires
April 16, 2019 02:47 ET (06:47 GMT)
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