Ex-VW CEO Winterkorn Added to German Diesel Criminal Probe

Updated on
  • Number of people being investigated almost doubles to 37
  • Prosecutor says Winterkorn may have known earlier of scandal

German prosecutors extended a criminal probe of Volkswagen AG’s diesel-emissions cheating to former Chief Executive Officer Martin Winterkorn as they almost doubled the number of people being investigated in the scandal.

The diesel probe now centers on 37 individuals, 16 more than previously acknowledged, after investigators raided more than two dozen locations this week, prosecutors in Braunschweig, Germany, said Friday in a statement. The suspects are being investigated for fraud and competition violations. Among the places raided were Winterkorn’s home and office in Munich, Bild reported.

Winterkorn was already among VW executives targeted in a separate probe of market manipulation tied to the scandal. U.S. regulators revealed in September 2015 that some of the company’s diesel engines carried software designed to cheat on emissions tests. While the Wolfsburg, Germany-based carmaker has reached settlements with U.S. and Canadian authorities costing $23 billion, probes remain under way in its home country.

“Investigations, including witness testimony and data obtained through the searches, have provided indications that" Winterkorn “may have known earlier than indicated about the manipulating software and its effects,” the prosecutors said.

Defeat Devices

In his first public appearance since being forced to resign 16 months ago, Winterkorn told lawmakers in Berlin last week that he first heard the phrase “defeat device,” the term for the test-manipulating software, shortly before the scandal came to light. He declined to specify when he initially learned about the engine manipulations, saying he wants to testify to prosecutors about that since they are investigating.

Volkswagen declined to comment while Felix Doerr, Winterkorn’s lawyer, didn’t immediately reply to e-mails and calls seeking comment.

Friday’s announcement will raise hopes of the about 1,400 investors who have sued Volkswagen for a combined 8 billion euros ($8.6 billion) in Germany, claiming the company was late in disclosing the scandal and the troubles with U.S. regulators who looked into emissions of VW diesel cars as early as 2014. To succeed in court, investors need to prove that the top leadership knew about the scam before the U.S. authorities disclosed the probe in Sept. 2015.

"Most investors we speak to work under the assumption that former management was aware of questionable emissions practices," Arndt Ellinghorst, a London-based analyst at Evercore ISI, said in a note to clients. “The question is whether management was aware of the extent of the cheat and its potential consequences. Lawyers looking to sue VW for market manipulation would certainly have more ammunition, in our view, if the former CEO was found guilty of fraud."

This week’s raids were based on warrants issued mostly at the end of last year. Investigators raided 28 premises, concentrating on the cities of Wolfsburg and nearby Gifhorn and Braunschweig. Police and prosecutors searched private homes and offices.

Braunschweig prosecutors opened their criminal probe into the diesel-emission scandal within days after VW admitted it cheated on emission testing in September 2015. The investigation was later extended to cover 21 people, none of them a top executive.

In June, prosecutors opened a separate probe into allegations that Winterkorn and board member Herbert Diess may have told investors too late about the scandal and thus manipulated the VW share price. Chairman Hans Dieter Poetsch was added to that market-manipulation case in November.

The German prosecutors are also probing another six people for manipulation of CO2 emissions data and an in-house lawyer over allegations he destroyed documents related to the case. Volkswagen may face fines over the German criminal probes.

Six German Volkswagen executives were charged in the U.S. earlier this year for their role in the diesel-emissions scandal, none of them being a former or current management board member. At the same time, Volkswagen agreed to plead guilty over the emissions-cheating scandal and to pay $4.3 billion to end the U.S. criminal case.