The US Securities and Exchange Commission has sued Volkswagen and its former chief executive Martin Winterkorn over the carmaker’s diesel emissions scandal that the regulator alleges defrauded US investors.
The SEC says Volkswagen issued more than $13bn in bonds and asset-backed securities between April 2014 and May 2015 in the US, despite senior executives at the time being aware that 500,000 vehicles in the country exceeded legal limits on vehicle emissions.
A Volkswagen spokesman called the case “unprecedented” and “legally and factually flawed”. The company did not miss any payments on the bonds at issue, the spokesman said, adding that no one involved in their issuance knew of the emissions issue.
The SEC’s complaint was filed in the District Court for the Northern District of California on Thursday.
“The complaint alleges that Volkswagen made false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and VW’s financial standing,” the SEC said.
“By concealing the emissions scheme, Volkswagen reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company, according to the complaint,” the agency said.
The amount paid by Volkswagen in 2017 as a criminal fine
The lawsuit follows Volkswagen’s guilty plea in a case brought by the US Department of Justice in January 2017, when it paid a $2.8bn criminal fine.
In its annual report, the German carmaker said the securities regulator was investigating bonds it had issued and whether it violated the law by failing to disclose the company’s cheating in connection with those bonds.
The US Environmental Protection Agency exposed the scandal in September 2015, a year after research from the International Council on Clean Transportation showed a wide discrepancy between emissions from on-road and laboratory use from certain diesel vehicles.
Volkswagen would later admit those discrepancies were a result of “defeat devices” installed in its cars to detect when they were being tested. They would then enter an illegal low-emissions mode to meet the standard. In real-world driving, car emissions were up to 40 times higher than the limit.
After the ICCT study came out, the environmental group gave its findings to US regulators, who questioned Volkswagen about the results. Some employees engaged in a cover-up for more than a year, but the carmaker has maintained its board was unaware of the cheating or cover-up.
Last year, however, US prosecutors brought charges against Mr Winterkorn — who stepped down within a week of the scandal’s exposure — alleging that he was told of the emissions irregularities via email in May 2014. They also alleged that he later instructed VW employees to “mislead and deceive” regulators and offer fabricated reasons for the emissions discrepancies.
A VW spokesman said the SEC’s case repeated “unproven claims about Volkswagen’s former CEO, who played no part in the [bond] sales”.
In Germany, 3,600 shareholders are seeking €9bn in damages from Volkswagen for allegedly failing to inform them earlier about the scandal. After the EPA issued its notice of violation in September 2015, VW’s stock value nearly halved.
Volkswagen has long maintained that its top executives were blindsided by the EPA notice. In an account for a German court last year, Volkswagen called the EPA’s implied threat of a €19bn fine “a total shock” and “a fundamental paradigm shift in the administrative and penalisation practises of the US authorities”.
At the time, Volkswagen had estimated damage of the scandal at just $150m.