By on March 15, 2016

money

The numbers are big — 278 investors seeking $3.61 billion — but the latest lawsuit leveled at Volkswagen is merely another drop in the penalty bucket for the embattled automaker.

As has been expected for some time, a group of institutional investors from numerous countries is seeking compensation for financial damage caused by Volkswagen’s diesel emissions scandal, Reuters is reporting.

The lawsuit was filed Monday in a Lower Saxony court — the same jurisdiction as Volkswagen’s headquarters — and alleges the automaker breached its duty under capital markets law between the time the “defeat device” was first installed in diesel models and when the scandal went public last September.

Sparked by the E.S. Environmental Protection Agency’s Notice of Violation, the scandal saw Volkswagen shares plunge in value, wiping billions out of the portfolios of investors who had been unaware of what was occurring behind the scenes at Volkswagen.

Among the group’s members are a number of German insurers and the California Public Employees’ Retirement System.

Their lawyer, Andreas Tilp of law firm TISAB, said the suit was filed because Volkswagen “persistently denies any settlement negotiations and also refuses to waive the statute of limitation defense until now.”

Earlier in the month, Volkswagen released a document explaining what it knew about the defeat device and when, using the admission to throw cold water on looming investor lawsuits.

However, the automaker’s official recollection has been called into question ever since, and this past weekend news arose that suggests a possible cover-up in the U.S.

Investigations into the Volkswagen are continuing as the automaker struggles to come up with a plan to recall and fix the affected diesel vehicles, sold between 2009 and 2015. In addition to the growing list of lawsuits and the expense of fixing millions of vehicles, the company is also facing fines totaling in the tens of billions of dollars from regulators.

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46 Comments on “Volkswagen Investors Want an Expensive Pound of Flesh...”


  • avatar

    Do I think it’s fair to sue Volkswagon for cheating against emissions regulations that were progressively difficult to achieve?

    Well, I drive a 6.4-L and a 6.2-L with a supercharger…

    And I hate enviro-fascism.

    Imagine how many people who weren’t responsible who will lose their jobs and suffer because of this.

    Think of the lives that will be ruined.

    The livelihoods.

    Just think about them…

    • 0 avatar
      Ubermensch

      In BTSR world it is okay to break the law if it is just “too hard” (cue violins) for a huge corporation to follow them.

      Jesus, do you even listen to yourself sometimes? How little self awareness can one person have and still be considered sentient?

      • 0 avatar

        In my world, nuclear power, solar power and other forms of energy provide power – where appropriate…America has a base on the moon and Mars and the streets are clean and everyone is happy…because violent criminals have been exiled to suffer in Antarctica – or to dig tunnels on the moon/Mars rather than being allowed to survive off the tax dollars of the innocent and hard working. Just like in Star Trek VI.

        In my world VW doesn’t even exist because there’s no need for it beyond new Bugattis.

    • 0 avatar
      RobertRyan

      Agree, fines should be dropped but VW, should be forced to fix the cars

      • 0 avatar
        jpolicke

        Why should the fines be dropped? This is not an option, as in ‘fix the cars OR pay the fines’. The judge doesn’t give a thief a choice of restitution or jail. The first is because it’s justice for the victim, the second is to deter.

    • 0 avatar
      cbrworm

      It is unfortunate the amount of damage this has caused to VW employees around the world. Maybe the German government will provide some sort of bailout.

      • 0 avatar
        RobertRyan

        No, VW is becoming the Automotive Apple, making sure they pay very little. More effective, would be to forget the fines and get them to fix the vehicles
        Tax Minimization by corporations is now a nice way to say tax evasion

        • 0 avatar
          SCE to AUX

          Uh, nobody seeks to pay higher taxes. Tax evasion is illegal, tax avoidance is not.

          • 0 avatar
            dal20402

            Depends on how you define “tax avoidance.”

            You can engage in whatever transactions you want to minimize taxes as long as they have “economic substance.” If a transaction reduces your taxes but does not otherwise change your economic position in any way, it will be disallowed if the IRS examines it and you will face tax penalties. So if by “tax avoidance” you mean sham transactions, which may not rise to the level of tax evasion, then “tax avoidance” may well be illegal.

          • 0 avatar
            RobertRyan

            A fine line, that is constantly being broken by big multinational corporations using Off Shore, Tax Havens, to ” minimise tax”. It has become so obvious, that many countries are having conferences on how to penalise corporations who do this regularly..

    • 0 avatar
      FreedMike

      “Do I think it’s fair to sue Volkswagon for cheating against emissions regulations that were progressively difficult to achieve?”

      Yep. No one forced them to cheat. And they didn’t tell their investors they were breaking the law to make sales. They were enticing investors without disclosing all the facts to them. I call that fraud. I worked for a company that did the same thing, just by giving the market a BS story about how well the company was doing, and cheated on the books to back up the story. Google “Worldcom”. The CEO who did it is doing 25 years in Club Fed, and he earned every day of the sentence – he put tens of thousands of people (me included) out of a job, and lost investors billions of dollars (including me and every other employee who had stock options and stock-based retirement plans).

      VW is doing the same thing, just with a different kind of fraud.

      Put differently: would the average investor have bought VW shares if they’d known about this?

      Case closed.

      • 0 avatar
        05lgt

        Hey, I worked for Alcatel back then and lost my job when it all came to light (that the fibers were dark because of fake sales). My shares went so very badly worthless…

      • 0 avatar
        Pch101

        In practice, fraud is very difficult to prove. There is probably no fraud case here.

        • 0 avatar
          dal20402

          I agree that fraud is difficult to prove but I disagree that it won’t be proven here. This is about as clear a case as you’ll get.

          • 0 avatar
            Pch101

            Senior management claims that it didn’t know. If you can’t establish that it knew, then you can say goodbye to any fraud claim.

        • 0 avatar
          jim brewer

          Securities Fraud isn’t so hard: Material omissions of fact will work.

          Also, you have more general criminal penalties such as mail or wire fraud, which basically consists of telling lies over the internet for pecuniary gain. Like sending falsified test results to the EPA, for example.

          Then you have racketeering, which consists of repeatedly committing wire fraud as part of an over all scheme to defraud. Much higher criminal penalties and triple damages.

        • 0 avatar
          jthorner

          “In practice, fraud is very difficult to prove. There is probably no fraud case here.”

          Fraud (noun): “A person or thing intended to deceive others, typically by unjustifiably claiming or being credited with accomplishments or qualities.” Alternate definition: “wrongful or criminal deception intended to result in financial or personal gain.” (https://www.google.com/search?q=define+fraud&ie=utf-8&oe=utf-8)

          VW clearly committed fraud.

          The prosecution rests, and wins.

          • 0 avatar
            Pch101

            Er, that’s not a legal definition of fraud.

            One of the first rules of avoiding lame statements on the internet is to understand the difference between the definitions used by laymen and the more specific terminology used by attorneys, scientists, physicians, etc. within those contexts.

    • 0 avatar
      zerofoo

      VW harmed it’s dealers and customers. It sold a product that was not as described.

      The environmental and employment arguments are irrelevant. VW falsely claimed their product was compliant with law. Fraud is fraud.

      VW executives are no better than Bernie Madoff. The executives that knowingly approved these defeat devices belong in prison and VW needs to compensate their dealers and customers for the financial harm they caused.

  • avatar
    87 Morgan

    You didn’t answer your own question, do you think it’s fair?

    Mopar ETAL never claimed to have the cleanest 6.4 or 6.2. They have only indicated they are emissions compliant, which we can only presume they are.

    VAG lied. Which means they committed fraud. Which means they have to pay some fines. Pretty simple.

    If the regulations were too strict to meet, they should have said so, and then worked with the regulators to work on a solution to the regulations.

  • avatar
    Rday

    when you roll the dice you pay the price. VW lied and gambled due to their hubris and arrogance, something quite common in Germany. So they will hopefully pay the price for their sins.

  • avatar
    John

    Volkswagen continues to follow the three “A”s of disaster management:

    1. Accept that a disaster has occured
    2. Assess the situation, and possible responses
    3. Act

    And, in each and every instance, Volkswagen’s plan is to take the stupidest possible action their great minds can come up with. It’s worked great so far – why change a thing?

    • 0 avatar
      RobertRyan

      Which minimizes cost. That is the game, still growing globally, but making sure the cost of Dieselgate is minimal

      • 0 avatar
        brettc

        They might be doing well at minimizing financial cost now, and they might be able to minimize fines if they give the EPA/CARB their electric car quota. But the long-term damage will haunt VW for years from TDI drivers and the Camry driving general public alike.

        Since they didn’t act fast enough to minimize this, it’s going to remain in people’s brains like GM’s early 80s diesels. We all know how that went.

    • 0 avatar
      Scoutdude

      Now they are not following that procedure.

      1. When confronted they lied and cheated some more in hopes that no one would notice.

      2. The did not really asses the situation and put a plan in place to address it that would minimize the issues. Instead they cheated again digging themselves a deeper hole both in public perception and increasing the scrutiny and extent of the gov’t action they would face.

      3. They didn’t really act and have been dragging their feet on actually fixing the issues and putting it behind them.

      They truly seem to be interested in trying to take the company down by making things as worse as possible.

    • 0 avatar
      wmba

      @ John

      Exactly. VW has no idea whatsoever how to manage this situation for minimum impact on the company. They continue to piss off the EPA which has the Dept of Justice as its prosecutor in getting these idiots to come to heel from the original cheat perspective. DOJ and state AGs are also preparing separate fraud criminal charges.

      VW have apparently proposed nothing of any merit to either EPA or CARB as to how they plan to sort the physical fixing of affected vehicles. This is a separate issue financially from the likely proposed fines for cheating in the first place, being pursued by the DOJ as mentioned above.

      In Germany, they came up with the laughable solution for pre-urea equipped diesels, the ones with only an NOx trap. By collusion, IMO, they got the German transport authorities to rubber stamp the fix. Under Type Approval regulations in the EU, this non-solution is imposed by law right across the EU, whether or not an individual country believes it to be bullsh*t. So other avenues are being explored, particularly in France. There may be criminal charges from German police, but they are not proceeding fast – gotta root for the home team.

      The first investor suit described in this article is a further likely financial drain. Other suits will follow.

      And in no particular area have VW shown any sign of real remorse beyond admitting the cheat back in September, just stupid rejoinders, passing the buck internally, claiming the German translation of EPA regulations was flawed, trying to argue that nowhere did the EU or EPA regulations state that the real world NOx emissions had to meet the lab standard – the regulations only applied to passing the lab test and so on. This latter argument would test the patience of any sane person; why conduct lab tests if anything at all goes out in the real world? If you’re VW, passing lab tests is a separate enterprise from making vehicles.

      It’s unfortunate that VW workers and dealers will eventually have to bear the brunt of the utterly stupid and haughty mind set of upper management, created and led by the mighty Imperator, Ferdinand Piech, until a mere year ago. And who hides in the background now and is ultimately proven a complete dolt with hubris beyond mere mortals’ understanding, as things stand now. The company culture he created cannot withstand the slightest headwind without cracking and falling apart in disarray, with everyone blaming everyone else, and particularly, unmamed engineers somewhere in the engine room. A house of cards.

    • 0 avatar
      Pch101

      Volkswagen literally cannot afford to provide a solution that would satisfy you. It is stalling because it has no choice.

      • 0 avatar
        jthorner

        Pch101: VW seems to have missed the first commandment of criminal activity: Don’t do the crime if you can’t do the time.

        Everyone has choices at every moment, including VW’s dwindling cadre of arrogant, highly paid executives. The longer they string this mess out, the higher the damages go. This one cannot be managed in the traditional sense of cost minimization through tactical gamesmanship.

        • 0 avatar
          Pch101

          It’s a math problem.

          Stop moralizing for a second and go work a spreadsheet. VW can’t afford to buy back every car subject to recall in the US.

          VW has already negotiated successfully with the Europeans. FCA already set a precedent with NHTSA when it pushed back on the agency’s demands for a full-blown recall of the Jeeps that were catching fire in rear-end crashes.

          It makes sense for VAG to fight at this point, because it can’t afford not to. Literally.

  • avatar
    jpolicke

    So, the investors are so distressed at VW’s self-inflicted financial damage that the only thing that will pacify them is more financial damage?

    • 0 avatar
      Ol Shel

      Investors want what they want, and Volkswagen turned to investors to get what Volkswagen wanted. It’s a two-edged sword.

      VW did wrong, seeking profits.

      The investors broke no laws, seeking profits.

      Now, investors want their money back, before there’s no money left to get back.

      Get through your thick skull that it was a handful of elites at VW who decided to jeopardize the jobs, well-being, and wealth of millions of people.

      • 0 avatar
        RobertRyan

        Like the Sharks at Apple and Google, wanted to get away with as much as possible. I suppose those tech companies are worse, they make huge profits but do not pay tax

        • 0 avatar
          SCE to AUX

          You may want Google and Apple to pay taxes, but it doesn’t make their accounting practices illegal. Believe me, if there was something illegal there, the government would love to get its hands on that money with a huge legal settlement.

          In contrast, VW was (and possibly still is) engaged in illegal activity – likely to be proven in a court.

          • 0 avatar
            RobertRyan

            I know they have not ” broken” laws, but their intent is no different from someone or a Corporation, that deliberately avoids playing tax.
            Tax Minimisation is wearing very thin for many Governments, when a Corporations, that have turnovers in the Billions, somehow make a loss year after year

        • 0 avatar
          dal20402

          Even assuming that Apple is avoiding tax (which is not likely; accountants tend to be very conservative when advising the big guys), I’d rather have a bit of tax avoidance than tens of thousands of tons of oxides of nitrogen spewed into the atmosphere.

          • 0 avatar
            RobertRyan

            @dal20402 Well Direction Injection Gas engines, presumably produce more Ozone defeating Nitrides and Carcinogenic sub micron scale particles than a Diesel. Yes , no outcry as too many Automobile makers produce gas engines

          • 0 avatar
            DenverMike

            @Robert Ryan – You’re clearly talking “loopholes” in the tax code, exploited by all corporations. What’s not clear is why you’re bringing them up.

            You, as a business owner would do the exact same. You’d pay yourself a huge salary as an “employee” and invest most or all taxable *income* back into the business. Both would be a huge benefit to you and you’d have about zero tax liability.

            Whether it’s right or wrong is a different story.

            VW should face huge fines, even if they fix all illegal TDIs, but clearly the pre ’12 TDIs cannot be fixed and the later SCR cars would lose much fuel efficiency and performance, if not “reliability”.

            So there is no “fixing” any TDIs.

            VW screwed themselves and anyone involved with them financially, including employees, suppliers, dealers (including used car dealers, BHPHs), shareholders, VW car owners, etc. Besides the EPA, VW needs to make things right with all of them, plus anyone that has to breath VW emissions.

            If it puts VW “out a little”, who’s fault is that?

  • avatar
    Daniel J

    Isn’t investing about taking a risk? I wish I could have sued when the markets tanked back in 07 and 08.

  • avatar
    brandloyalty

    Another form of damage yet to be accounted for is the sales lost to VW, on the basis of lies, by other automakers. This has implications all the way from part suppliers to sales staff; and includes losses to hybrid sales resulting from unfair comparisons to VW diesels.

    Then there’s the environmental costs, but who’s standing up for those?


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