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German court opens proceedings over Volkswagen labor pay

A German court on Tuesday stated it had started proceedings against current and former Volkswagen managers, including management board members, on suspicion they awarded excessive pay to labor leaders in violation of fiduciary duties.

Wasting corporate funds is a breach of fiduciary duty in Germany according to the law.

A regional court located in Braunschweig, Lower Saxony, where the automaker is based, said it had started proceedings at the behest of prosecutors in the region.

Two former VW management board members along with the current and former managers in charge of personnel are being probed, the Braunschweig court stated.

Those being investigated were responsible for setting salaries and bonus payments for works council members, the court stated, adding that prosecutors think that the automaker likely wasted more than 5 million euros ($5.9 million) in excessive pay for labor leaders during May 2011 and May 2016.

Volkswagen has said it saw nothing wrong in the way executives awarded pay and bonuses for works council members and said the hearings were an opportunity to clarify legal questions regarding the pay which was awarded. VW stated the company itself was not going through investigation.

In 2016, prosecutors and tax investigators investigated offices of senior VW officials concerning overpayment and tax evasion.

In 2017, VW said it had cut salaries and suspended the bonuses of 14 works council members, consisting of council head Bernd Osterloh, as public prosecutors probed alleged earlier overpayment.

During that time, Matthias Mueller, the former Volkswagen chief executive, said the cuts in pay were a precautionary measure taken until clarification about the legality of pay levels was made.

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