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...

  • ToolGuy VW (marque not group) and Tesla very nearly switched positions on a YTD basis.
  • RHD Inexpensive gasoline appears to be a thing of the past. ILO is correct - we have enough sunlight, wind and emerging ocean wave energy to power the entire country and then some. Clean air is nice, and being free of the whims of OPEC, geopolitics and hugely profitable oil companies will do all of us a world of good.
  • Raymond Segura Can you tell me where I can get the rear bumper for 69 impala?
  • Art Vandelay some of the crazy numbers I get. Percentages look bigger with any fluctuations with low volume makes and brands leaving the market will see massive month over month changes. But what’s with Buick? I still see the occasional ad on TV and yet the drop is disproportionate even compared to all the other GM brands.
  • Master Baiter "There is no mandate for consumers to buy EVs, not in any country or state. That’s made up."Right. And you are not mandated to purchase a toilet that only uses 1.6 gallons/flush. You could choose to not have a toilet--just go in the woods, like the bears do.