United States sues Volkswagen for 'massive fraud' over emissions scandal

Marco Green
March 15, 2019

The US Securities and Exchange Commission (SEC) has filed a complaint against Volkswagen (VW), accusing the German automating giant and its former CEO Martin Winterkorn of defrauding US investors by cheating on emissions tests.

The SEC said: "Volkswagen issued more than $13bn in bonds and asset-backed securities in the USA markets at a time when senior executives knew that more than 500,000 vehicles in the United States grossly exceeded legal vehicle emissions limits, exposing the company to massive financial and reputational harm".

The complaint claims Volkswagen made false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and the company's financial standing, which gave Volkswagen a financial benefit when it issued securities at more attractive rates for the company.

Volkswagen AG, along with two of the firm's subsidiaries and former CEO Martin Winterkorn, have been charged with defrauding United States investors, the SEC said on Friday.

The regulator said that from 2007 until 2015, VW carried out a "massive fraud" when selling securities and half a million cars it described as clean diesel, when executives knew about the extent of the cheating, the SEC alleged.

Mr. Winterkorn resigned shortly after the scandal was revealed.

Volkswagen, Europe's largest automating concern, has called the step "legally and factually flawed", vowing to "vigorously contest" the complaint.

German markets regulator Bafin could not be reached for comment about whether it was working with the SEC.

The decision is the latest blow to the German carmaker from the "dieselgate" scandal, in which it admitted to installing software on its vehicles to trick emissions tests.

Volkswagen has agreed to pay more than $25 billion in the USA in connection with the three-and-a-half-year old scandal, paying claims from owners, environmental regulators, states and dealers, and has offered to buy back about 500,000 polluting U.S. vehicles.

The company has paid some $20 billion in fines and civil settlements. It has also pleaded guilty to criminal charges in the United States and several managers, including Winterkorn, were charged there.

Investors were informed about VW's diesel cheating after US regulators blew the whistle on September 18, 2015.

At the time, VW believed it could fix polluting vehicles with a software update and gauged the potential financial risk to be around 150 million euros, the Braunschweig document shows.

Other reports by Click Lancashire

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