More Legal Trouble for Volkswagen, Former CEO

Steph Willems
by Steph Willems
more legal trouble for volkswagen former ceo

While three and a half years have passed since the Volkswagen diesel scandal broke, its reverberations are still being felt. For the automaker turned green soothsayer, this usually comes with financial hardship attached, plus the requisite regurgitation of a past VW would like to see forgotten.

The latest salvo launched at VW over its emissions-rigged cars comes from the U.S. Securities and Exchange Commission, which is suing the company — as well as its former CEO, Martin Winterkorn — for the “massive fraud” it says VW perpetrated on investors.

The civil complaint, filed Thursday, argues that VW and its leadership should have informed investors that the company was about to take a massive hit. While the exact story of “who knew what and when,” it’s clear the automaker knew a reckoning was in the works. Just how big of one is up for debate.

Ultimately, the fines, penalties, and recalls cost VW more than $30 billion and sparked its transformation into an automaker that, just this week, promised 22 million electric vehicles on the road within a decade.

But the SEC isn’t concerned with VW’s EV ambitions and new persona. It wants penance for the $13 billion in bonds and asset-backed securities the company issued in the U.S. from April 2014 to May 2015.

Volkswagen “reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company,” the SEC suit said, as reported by Reuters. The regulator claims VW “repeatedly lied to and misled United States investors, consumers, and regulators as part of an illegal scheme to sell its purportedly ‘clean diesel’ cars and billions of dollars of corporate bonds and other securities in the United States.”

The SEC singles out Winterkorn, too. The former CEO, who hit the road days after the scandal broke in September 2015, was indicted by U.S. prosecutors last year for his alleged role in violating the Clean Air Act with a fleet of polluting vehicles outfitted with “defeat devices” in order to fool Environmental Protection Agency testers.

The suit seeks to collect the German national’s “ill-gotten gains” while also imposing penalties and preventing him from ever serving as an officer or director of a U.S. company.

Of course, Volkswagen’s having none of this. It fired back at the SEC, saying the regulator’s suit was based on “legally and factually flawed” information.

“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 automaker stated, adding that the people issuing the bonds had no way of knowing the company’s vehicles were rolling bundles of illegality.

In addition to an expensive recall and buyback program, VW was forced to cough up $4.3 billion in fines in the United States.

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  • Mike-NB2 Mike-NB2 on Mar 16, 2019

    I agree 100% with redapple above. I’m starting this intending it to be a reasoned comment but I know it’ll quickly turn into a rant. The TDI ‘scandal’ is once again turning into a witch hunt. I wonder if VW was an American company would they be facing all this crap? GM got off light on its flawed ignition switch problem and there were FATALITIES with that one. Yes, I know that NOx has health effects. Come closer Greenie so I can hit you with this stout tree branch. I had a 2013 Passat TDI and after the scandal broke I was walking to my car one day when a Dodge Ram diesel went by me. The exhaust was slightly modified and the truck was clearly not a commercial vehicle. Here’s a guy with a modded Ram HD that he uses to take his daughter to swimming lessons who burns three times the fuel and dumps tons of emissions out but he’s perfectly legal. Meanwhile, I’m a massive polluter and a scourge on humanity by driving my mid-size car that gets better fuel economy than most sub-compacts. I realize that my TDI love probably makes me immune to logic on this issue. I gave my Passat back in the settlement not because I really wanted to but because it didn’t make sense to do otherwise. I got about 90% of the purchase price on a four year old car. That kind of deal won’t come along again so I took it. Coincidentally, I’m currently driving a 2015 Passat TDI as a loaner from the VW dealer as we wait for the first GLIs to roll off the truck. I sold my car on Wednesday in preparation for that deal to come through. It took me less than a second behind the wheel to remember how much of a TDI fan I am. My fuel burn on Monday in my ’17 MKZ 3.0L was double what I burned on Friday in the Passat. Of course there is a bit of a trade off in performance… Now if VW Canada would get off their asses and launch the GLI soon…

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    • Lorenzo Lorenzo on Mar 17, 2019

      I have to agree/disagree with the witch hunt term. It's more like piling on, with everyone harmed in any way, real or imagined, to any degree, lining up for their lottery payoff. The principle involved in banning double jeopardy in criminal cases apparently doesn't apply to civil actions. I'm especially skeptical of the SEC responding to an investor complaint. The bonds were sold with a repayment schedule. Bond prices always fluctuate, and as long as the repayment schedule is met, there should be no complaint. If the complainant was depending on selling the bond at a higher price than he paid, he's a speculator, not an investor. There's no guarantee of bond value, only repayment, and the SEC should ignore the complaint.

  • Null Set Null Set on Mar 16, 2019

    The difference between VW's diesel emissions scandal, and GM's ignition switch death trap, and the US government's response to them, is simple. One just has to be appropriately cynical. In VW's case, they fooled and *publicly* embarrassed the US government itself. In GM's case, they just killed ordinary citizens. Hell hath no fury like a government agency embarrassed in public.

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    • Geozinger Geozinger on Mar 16, 2019

      Takata. First, faulty seat belts in the 80's and then faulty airbags in the 00's-10's, although some think it was happening as far back as the 90's. Nothing but greed (IMO) and incompetence. NHTSA fined them, the US government charged them and then they went "poof"! Millions of cars with potentially deadly airbags, some being recalled for the second time now. Good times...

  • Tassos The EQS is the best looking BEV, better than even the only Tesla I would ever consider (the S) and more luxurious inside etc etcThe self driving features will come in handy when I'm 110 and my eyesight and reaction times start to suffer.But that's four decades away, and only Tim recommends 40 year old "used cars"
  • Tassos "Baby, Baby light my fire!""Oh God please give me a Kia Forte" --Janis Joplin
  • Tassos The fugly looks of any Subaru, and especially the non-sporty non-elegant, fugly, low-rent looks and interior of the WRX are alone a sufficient turnoff to never want to own one.One can be a 100% car enthusiast but ALSO demand a beautiful AND luxurious vehicle one can be truly proud of and which makes one very happy every time one drives it.The above is obviously totally foreign to Subaru Designers and managers.Αnd who cares if they sell all they make? this is 100% worthless bragging, since they hardly make ANY. ALL of Subaru's models together, all dozen of them, sell less than the top selling Toyota or Honda or even Tesla sells. ANd furthermore, if you have the intellectual horsepower to understand it, bulldude, which I am 99% sure you sure as hell do not, it is NOT about the sales units, it is not even about the sales revenue.It is all about the P R O F I T S.Am I going slow enough for you, bulldude?
  • Thehyundaigarage Am I the only one that sees a Peugeot 508?
  • Lou_BC I realized it wasn't EV's burning by the absence of the usual suspects.