Former VW Chief Faces New Allegations -- WSJ

Date : 04/16/2019 @ 8:02AM
Source : Dow Jones News

Former VW Chief Faces New Allegations -- WSJ

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)

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