US SEC Sues Volkswagen And VW Former CEO Martin Winterkorn

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The Securities and Exchange Commission (SEC) of the United States of America has charged Volkswagen, one of the largest carmakers in the world, and Martin Winterkorn,  its former Chief Executive Officer, for defrauding bond investors during the 2015 emissions scandal  which was known as “dieselgate.”

Late last Thursday, the SEC filed a civil complaint in San Francisco. It covers the period from April 2014 to May 2015.

In a statement, the regulator said that its complaint centres around VW issuing over $13 billion (£9.8 billion) in bonds and asset-backed securities in the US markets. It said that these were done “at a time when senior executives knew that more than 500,000 vehicles in the United States grossly exceeded legal vehicle emissions limits, exposing the company to massive financial and reputational harm.”

The complaint of the SEC also claims that VW made “false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and VW’s financial standing. 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 lawsuit aims to ban Winterkorn from serving as an officer or director of a public firm in the United States. The SEC said that the complaint intends to recover “ill-gotten gains with prejudgment interest, and civil penalties.”

The dieselgate scandal initially surfaced in 2015 when VW was caught cheating on emissions tests in the United States. This cost VW billions of dollars in settlements and lawsuits, and the firm was forced to recall millions of vehicles.

Winterkorn stepped down from his position in September 2015. In 2018, he was charged by prosecutors in the United States for allegedly conspiring to cover up the diesel emissions cheating of the German automaker.

VW did not immediately answer a request for comment regarding the matter. The automaker, however, gave a statement to CNBC before the formal complaint filing of SEC.

It stated: “The SEC’s complaint is legally and factually flawed, and Volkswagen will contest it vigorously. The SEC has brought an unprecedented complaint over securities sold only to sophisticated investors who were not harmed and received all payments of interest and principal in full and on time.”

It added: “The SEC does not charge that any person involved in the bond issuance knew that Volkswagen diesel vehicles did not comply with US emissions rules when these securities were sold, but simply repeats unproven claims about Volkswagen AG’s former CEO, who played no part in the sales.”

VW noted: “Regrettably, more than two years after Volkswagen entered into landmark, multibillion-dollar settlements in the United States with the Department of Justice, almost every state, and nearly 600,000 consumers, the SEC is now piling on to try to extract more from the company.”