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SEC sues VW, former CEO Winterkorn for fraud over diesel scandal – Roadshow

The complaint centers around VW continuing to sell bonds and securities without informing investors about problems with diesel cars.


Volkswagen

The US Securities and Exchange Commission on Thursday announced it is suing Volkswagen‘s former CEO Martin Winterkorn and two of the company’s subsidiaries with “defrauding US investors.” The SEC alleges that VW misled bond investors even though it knew about the company’s emissions-cheating problems, which would come to be known as Dieselgate.

The SEC’s complaint, filed in a US District Court in San Francisco on Thursday, centers around the fact that VW issued $13 billion worth of bonds and securities in the US between April 2014 and May 2015 without disclosing any knowledge of so-called cheat devices in diesel cars. 

At the time, the SEC says, “senior executives knew that more than 500,000 vehicles in the United States grossly exceeded legal vehicle emissions limits.” By hiding that information, the complaint accuses VW “reaped hundreds of millions of dollars in benefit” by selling those securities for inflated figures.

As well as Volkswagen and Winterkorn, the SEC’s filing names Volkswagen Group of America Finance and VW Credit. Along with civil penalties, injunctions and repayment of “ill-gotten gains,” the SEC seeks to bar Winterkorn from holding officer or director positions. The long-serving Volkswagen CEO resigned in 2015 in the wake of the diesel scandal coming to light. He was subsequently charged with wire fraud and conspiracy by the Department of Justice.

VW did not immediately return a request for comment. The automaker gave a statement to Automotive News saying that the SEC complaint “is legally and factually flawed, and the company will contest it vigorously.”

The issue with diesel engines was first publicized in September 2015. Certain Volkswagen diesel engines produced more pollutants than allowed by emissions laws when driving on normal highways, but “cheated” and produced legal levels of emissions when run on test equipment. In 2017, Volkswagen pleaded guilty to charges relating to the scandal.

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