The US Securities and Exchange Commission is taking Volkswagen and its former CEO Martin Winterkorn to court over the diesel emission scandal. The SEC is alleging that the German automaker committed “massive fraud” on US investors. The company in 2015 was caught using illegal software to cheat on US pollution tests. It was one of the largest scandals in the automotive industry and it has since cost VW a total of 29 billion euros.
The Securities and Exchange Commission notes that the German car maker failed to notify investors and regulators on the extent of the scandal. If the company is found culpable, it will end up paying billions of dollars in fines and other penalties. However, the automaker claims that the lawsuit is unfair. VW notes that there are many other companies that have paid significantly small fines for the same offenses.
A civil complaint that was filed on Thursday by the SEC confirmed that Volkswagen issued a total of $13 billion in bonds and asset-backed securities in the US between April 2014 and May 2015. The regulator alleges that during this period, senior executives were aware that nearly 500,000 diesel cars had grossly violated emission standards in the US and yet failed to say something. The lawsuit that was filed in San Francisco is also looking to bar Winterkorn from serving in any public US company. The SEC wants to recover “ill-gotten gains” from him as a result of the scandal.
The regulator added that it will be seeking additional civil penalties on Winterkorn too. The former VW CEO resigned in September 2015, a few days after the diesel scandal became public. He was later charged by prosecutors in the US for conspiring to cover up the scandal. German authorities also launched investigations in the matter and a number of executives at the company were arrested and charged.
Nonetheless, Volkswagen has maintained that the lawsuit by the SEC is “legally and factually flawed.” The company said that it will contest it vigorously. But the scandal has taken its toll on the company already. The German automaker has spent billions of dollars paying claims in the US to VW owners who were affected. The company has also offered to buy back over 500,000 polluting cars that were fraudulently sold. WW has parted with a total of $4.3 billion in US criminal and civil fines too.
However, it seems that the SEC is not satisfied. The government regulator argues that Volkswagen has never really “paid back the benefits it fraudulently gained” as a result of the scandal. It will be interesting to see how this lawsuit will turn out though. VW has said that it didn’t feel obligated to inform investors about the scandal because, at the time, it was not facing any possible risk of financial penalties. The company also noted that the former CEO wasn’t involved in the issuance of bonds and other securities. Volkswagen claims that this suit is wrong, however, the SEC is looking to push it through at all costs.
