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SEC sues VW and its ex-CEO over defrauding investors during emissions scandal

Lianna Brinded
Head of Yahoo Finance UK
A Volkswagen badge on a production line at the Volkswagen plant in Wolfsburg, Germany. Photo: Fabian Bimmer/Reuters

The US Securities and Exchange Commission (SEC) has charged one of the world’s largest carmakers, Volkswagen (VOW.DE), and its former CEO Martin Winterkorn for defrauding bond investors during the 2015 emissions scandal — dubbed “dieselgate.”

The SEC filed a civil complaint in San Francisco late on Thursday that covers the period from April 2014 to May 2015.

The regulator said in a statement that its complaint centres around VW issuing more than $13bn (£9.8bn) in bonds and asset-backed securities in the US markets “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 SEC’s complaint also alleges 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 seeks to ban Winterkorn, VW’s former CEO, from serving as an officer or director of a public US company. The SEC said the complaint aims to recover “ill-gotten gains with prejudgment interest, and civil penalties.”

The dieselgate scandal first emerged in 2015 when VW was caught cheating on emissions tests in the US. This cost VW billions of dollars in lawsuits and settlements, and the company was forced to recall millions of vehicles.

Winterkorn resigned in September 2015 and was charged by US prosecutors in 2018 for allegedly conspiring to cover up the German automaker’s diesel emissions cheating.

VW did not immediately respond to a call for comment at the time of publication. However, the automaker gave a statement to CNBC ahead of the formal SEC complaint filing:

“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.

“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.

“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.”