Volkswagen Group boss Herbert Diess is among a number of current and former executives from the firm who have been charged with stock market manipulation in relation to Dieselgate by German prosecutors.
The prosecutor’s office in Braunschweig has filed criminal charges against Diess, chairman Hans Dieter Potsch and former CEO Martin Winterkorn. They have been charged with intentionally failing to inform investors in time about the financial impact of the scandal. By doing so, they improperly influenced the share price of the company. The charges follow an investigation by BaFin, Germany’s independent financial regulatory authority.
Lawyers for Diess told the Reuters news agency that he will keep his role as Volkswagen's CEO and defend himself with 'all legal means'. They said that Diess joined the firm only on July 2015, and it was therefore not possible for him to foresee that the diesel issues would have financial consequences that would affect capital markets.
Winterkorn was Volkswagen's CEO when the scandal broke and resigned soon after. He has since claimed that he wasn't informed of diesel emission manipulation measures any earlier than Volkswagen has officially admitted.
However, documents from a meeting attended by Diess, Potsch and Winterkorn on 27 July 2015 are alleged to prove that the three discussed when to inform US authorities about the diesel emissions test manipulation measures well ahead of an official announcement made by Volkswagen on 22 September 2015. Volkswagen’s share price lost up to 37 percent of its value in the week the scandal went public.
Potsch was the firm’s chief financial officer before becoming chairman of the supervisory board in 2015.
Legal proceedings are already underway in connection to Volkswagen’s admission in 2015 to developing and using illegal engine control software to alter the outcome of diesel emissions tests.
Volkswagen is estimated to have spent around £26 billion (Rs 229,886 crore) on fines, settlements and other expenses related to Dieselgate so far, with several court cases relating to the scandal still ongoing.
In April, Braunschweig prosecutors charged Winterkorn and three other Volkswagen managers with defrauding customers by selling cars fitted with defeat devices.
In a statement, VW board member responsible for the integrity and legal affairs Hiltrud Dorothea Werner said, “Today, the Braunschweig Public Prosecutor’s Office informed Volkswagen AG of the charges against the company and individual defendants in proceedings under the Securities Trading Act. The company has meticulously investigated this matter with the help of internal and external legal experts for almost four years. The result is clear: the allegations are groundless. Volkswagen AG, therefore, remains confident that it has fulfilled all its reporting obligations under capital markets law. If there is a trial, we are confident that the allegations will prove to be unfounded. Furthermore, the presumption of innocence applies until proven otherwise.”
As per an official statement released by the supervisory board of Volkswagen in this regard -
Volkswagen has cooperated closely with the public prosecutor's office. The 'Supervisory Board' has also dealt in detail with the investigation of the public prosecutor’s office and has respect for the public prosecutor’s office’s work. Nevertheless, based on its own extensive and independent investigations since autumn 2015, the 'Executive Committee' still can, also from today’s perspective, not see that the capital market was deliberately not informed. In addition to the presumption of innocence in general, there are, among other things, also the following specific aspects that speak against the charge of market manipulation:
- The substantial decrease in the share price of the VW share after the publication of the 'Notice of Violation on 18 September 2015' is due to the fact that the US authorities published their allegations completely unexpectedly during ongoing discussions with Volkswagen.
- The 'Board of Management' of Volkswagen could not foresee this change in the approach of the US authorities.
- In this respect, the Board of Management could rely on the legal advice of the renowned US law firm Kirkland & Ellis. On the basis of Kirkland & Ellis’s advice, it was to be assumed until the publication of the Notice of Violation that, as was the customary practice until then, a mutually agreed solution would first be worked out with the US authorities and then presented to the public in a joint statement.
Based on the findings available, the Executive Committee is therefore of the opinion that, prior to the publication of the Notice of Violation, the Board of Management of Volkswagen AG did not have sufficiently concrete indications that would have led to the obligation to inform the capital market immediately.
For this reason, the successful cooperation with the Chairman of the Supervisory Board and the Chairman of the Board of Management shall be continued.