WASHINGTON -- The U.S. Securities and Exchange Commission is suing Volkswagen and its former chief executive, alleging they defrauded investors during the German auto giant's notorious diesel-emissions scandal.
From April 2014 to May 2015, Volkswagen raised more than $13 billion from U.S. investors in the bonds and securities markets as senior executives lied and used software to cheat emissions tests, according to the SEC complaint.
"Volkswagen made false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and VW's financial standing," the regulator said in the summary of its complaint. "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."
The automaker, based in Wolfsburg, Germany, dismissed the SEC allegations as "legally and factually flawed" in a statement Friday, according to reporting from CNBC. Volkswagen contends the agency is "piling on" years after the company admitted guilt and paid penalties.
Fines and legal settlements tied to the diesel scandal already have cost the carmaker well over $30 billion, increasing the pressure to cut expenses. Volkswagen said this week that it would cut 7,000 jobs in Germany in the next four years, primarily by not replacing workers who retire.
"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," Volkswagen said in the statement.
"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," the company said.
The complaint alleges that top Volkswagen executives, including chief executive Martin Winterkorn, were made aware of the cheat devices -- which had been installed in 11 million vehicles -- during a November 2007 meeting with company engineers. The cars would test as low emission when in fact their output was 40 times the U.S. legal limit. The scandal was exposed by the Environmental Protection Agency.
"Although at least one meeting participant warned that putting the existing vehicles on the road in the U.S. would damage VW's reputation if the vehicles' high emissions were later discovered, those concerns were ignored," the complaint says.
By making "false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and VW's financial standing," the commission says, Volkswagen positioned itself to reap hundreds of millions of dollars from investors on terms that were more favorable for the company.
The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest and civil penalties. It also wants to bar Winterkorn from holding any positions as corporate officer or director.
In June 2016, Volkswagen paid $14.7 billion to settle shareholder claims from the scandal, in one of the biggest class-action settlements in U.S. history. In January 2017, Volkswagen paid $4.3 billion in criminal and civil fines after the company pleaded guilty in a case lodged by the U.S. Department of Justice. It was the first time the company had ever pleaded guilty to criminal conduct in court.
The SEC seeks to bar Winterkorn from leading a publicly listed U.S. company and recover Volkswagen's "ill-gotten gains" as a result of the scandal. Winterkorn was indicted in federal court for his role in the cover-up last March.
The complaint alleges that Winterkorn encouraged the use of the cheat devices as part of his plan to turn Volkswagen into "the biggest, most profitable, and most environmentally-friendly car company in the world" by 2018."
Volkswagen and Winterkorn's lawyer, Steven Molo, did not immediately respond to requests for comment Friday.
Information for this article was contributed by Taylor Telford of The Washington Post; by Alexandra Stevenson and Jack Ewing of The New York Times; and by The Associated Press.
Business on 03/16/2019