Former Volkswagen CEO Martin Winterkorn has come under potential criminal investigation for his handling of the maker’s ongoing diesel emissions scandal.
Winterkorn has not been linked to the original subterfuge involving 11 million diesel vehicles sold in the U.S., Europe and other parts of the world. But German prosecutors are looking into the possibility that the former CEO and another, unnamed executive may have violated stock market regulations by waiting months before advising VW investors about the diesel cheating investigation.
For its part, VW said it sees “no new facts or findings” that would indicate financial law violations by the two executives. That echoes what the carmaker has said in responses to separate lawsuits filed by investors who claim significant losses as a result of the diesel scandal. VW now faces hundreds of lawsuits brought against it by investors, dealers and diesel vehicle owners.
The prosecutor’s office in Braunschweig, which is overseeing a broader investigation into the emissions cheating, opened the latest probe on behalf of Germany’s Federal Financial Supervisory Authority. A spokesman for prosecutor Matthias Diekman said only that the second executive under investigation is not Hans Dieter Poetsch. The current board chairman for Volkswagen AG, he previously served as Winterkorn’s chief financial officer.
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Volkswagen has confirmed that a memo was sent to Winterkorn on May 23, 2014, indicating possible irregularities involving diesel emissions. The automaker also said it is uncertain whether the CEO actually saw the document. But top officials did discuss the issue on July 27, 2015. The scandal finally broke on September 18, 2016, when the U.S. Environmental Protection Agency issued a violations notice.
VW did not issue an advisory to its investors until Sept. 22. At that point, the carmaker’s shares began a rapid tumble, quickly wiping out billions of dollars in shareholder value. From a 2015 peak of $253.20, shares plunged to just $92.36 on Oct. 2. They have rebounded slightly since then and have been trading in the $120 to $130 range this month.
Investors have taken the automaker to court asserting that VW knew about the problem for some time and was already in discussions with the EPA before the September 2016 public announcement.
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The automaker has countered such claims and is defending itself against the investor lawsuits. It is, however, working on a settlement aimed at resolving owners’ claims – which have been consolidated before a federal judge in San Francisco. A date for coming up with a settlement has been repeatedly postponed, most recently to June 28, though the court last week indicated the latest delay was approved in order to allow all sides to work out final details of a tentative agreement.
VW is downplaying the latest investigation, issuing a statement today that said, “No serious and manifest breaches of duty on the part of any serving or former members of the Board of Management have been established.”
Last March, the carmaker refuted claims that CEO Winterkorn should have known about the diesel issue at least by the July 2015 meeting. “In particular, it is not clear whether these participants understood already at this point in time that the change in the software violated U.S. environmental regulations. Mr. Winterkorn asked for further clarification of the issue.”
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The latest investigation, nonetheless, could complicate VW’s problems – and its potential liabilities. The automaker has already taken an $18.3 billion hit to its 2015 earnings to cover costs related to the diesel scandal. Many analysts believe VW will eventually have to spend billions more to put the matter behind.