- Probe looks at whether VW should have disclosed costs sooner
- Volkswagen sticks to recommendation to ratify board actions
German prosecutors are looking at whether former Volkswagen AG Chief Executive Officer Martin Winterkorn was too slow to tell investors about the potential cost of the diesel-emissions scandal, which wiped about 20 billion euros ($22.6 billion) off the carmaker’s market value in the week after it admitted to cheating.
The probe is reviewing whether Volkswagen should have disclosed the risks to investors sooner, prosecutors in Braunschweig said in an e-mailed statement Monday. On Sept. 22, four days after the cheating became public, Volkswagen set aside 6.5 billion euros to cover the cost of fixing rigged engines in as many as 11 million diesel cars worldwide. The figure later grew to 16.2 billion euros for legal and other costs.
“There is sufficient evidence that the duty of making a statement about the significant financial losses the company could expect may have existed at an earlier point,” prosecutors said.
The investigation will be fresh fodder for investors who have criticized Volkswagen’s handling of the diesel crisis, with one group seeking 3.3 billion euros in a lawsuit over how the company informed markets about the cheating. The carmaker will face investors at its annual meeting on Wednesday without having disclosed how the cheating came about or the details of its fix for the U.S. market.
Volkswagen’s second-biggest shareholder, its home state of Lower Saxony, welcomes the “intensity” of the prosecutors’ probe, Stephan Weil, the prime minister and a Volkswagen board member, said in a statement. “A speedy investigation and speedy conclusion are in everyone’s interest.”
Based on available information, lawyers for the company’s management and supervisory boards found “no explicit and severe breach of duty” by current or past executives, Volkswagen said in a statement. The latest probe by Braunschweig prosecutors doesn’t contain new facts or revelations, the company said, reiterating its recommendation that shareholders vote to ratify the actions of its board members at Wednesday’s annual meeting. VW has said in court filings defending against investor suits that it informed markets in a timely and proper way.
Felix Doerr, a lawyer for Winterkorn, didn’t immediately respond to an e-mailed request for comment.
The probe centers on the 69-year-old former CEO and another senior executive whom prosecutors didn’t identify, saying only it’s not current supervisory board Chairman Hans Dieter Poetsch, who was chief financial officer when the scandal broke last September. The second executive being investigated is VW brand chief Herbert Diess, German newswire DPA reported, without saying where it got the information. VW declined to comment on the DPA report.
Volkswagen has said Winterkorn received two memos on diesel-engine discrepancies in 2014, both included in packets of reading on other topics. The former CEO was also present at a meeting last July, together with Diess, where the diesel situation was a topic on the “periphery” of the gathering, VW has said.
The German carmaker faces hundreds of lawsuits in Europe and the U.S., and prosecutors are looking into allegations against 17 individuals potentially involved in rigging the engines in a separate probe. German financial watchdog Bafin investigated whether Volkswagen complied with disclosure rules when it admitted the wrongdoing and referred the matter to Braunschweig prosecutors, who disclosed their probe on Monday.
“The probe was prompted by our complaint filed with Braunschweig prosecutors,” Anja Schuchardt, a Bafin spokeswoman, said by telephone. “In the last weeks we have sent a great amount of material to prosecutors and have been in intense communication with them.”
The shares pared earlier gains of as much as 5.9 percent and closed up 5.1 percent to 124.75 euros in Frankfurt.
Volkswagen plans to submit a $10 billion settlement in the U.S. by a June 28 court deadline, although it doesn’t yet have final regulatory approval on a retrofit for the vehicles, a person familiar with the situation said last week.