The U.S. Securities and Exchange Commission (SEC) is taking legal action against Volkswagen and its former CEO Martin Winterkorn over the German automaker’s diesel emissions scandal, accusing of a “massive fraud” on U.S. investors.
VW was caught using illegal software to evade U.S. pollution tests in 2015, causing a global backlash against diesel that and has so far cost it more than $30 billion.
Regulators and investors argue the automaker should have informed them sooner regarding the scope of the scandal, while VW states it was not clear it would face billions of dollars in fines and penalties as others had paid out much lower sums for same offenses.
The SEC stated in its civil complaint on Thursday during April 2014 to May 2015, VW issued over $13 billion in bonds and asset-backed securities in U.S. markets at a time when senior executives were aware of more than 500,000 U.S. diesel vehicles grossly surpassed legal vehicle emissions limits.
The automaker “reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company,” the SEC stated, adding it “repeatedly lied to and misled United States investors, customers, and regulators as part of an unlawful scheme to sell its purportedly ‘clean diesel’ cars and billions of dollars of corporate bonds and other securities in the United States.”
The suit submitted in San Francisco seeks to prohibit Winterkorn from serving as an officer or director of a public U.S. company and recover “ill-gotten gains” together with civil penalties and interest.
Winterkorn, who resigned days following the scandal became public in September 2015, was charged by U.S. prosecutors in 2018 and alleged of conspiring to cover up diesel emissions cheating.
A lawyer for Winterkorn, who is in Germany, refused to comment on the SEC action.
VW said in a statement the SEC complaint “is legally and factually flawed, and Volkswagen will contest it vigorously. The SEC has brought an unprecedented complaint about securities sold only to sophisticated investors who were not harmed and received all payments of interest and principal in full and on time.”
The automaker added that the SEC “does not charge that any person involved in the bond issuance was aware that Volkswagen diesel vehicles did not adhere U.S. emissions regulations when these securities were sold” but repeats claims about Winterkorn “who played no part in the sales”.
