Volkswagen AG has described charges brought by German prosecutors against CEO Herbert Diess, Chairman Hans Dieter Potsch and ex-CEO Martin Winterkorn for market manipulation relating to the so-called 2015 dieselgate scandal as "groundless."
Volkswagen CEO Herbert Diess |
Prosecutors for the Brunswick area on Sept. 24 indicted the trio with willfully concealing from investors for nearly two months that the company was being investigated by U.S. authorities for cheating emissions tests. News of the scandal broke when details were first announced by the U.S. Environmental Protection Agency in November 2015. The carmaker's share price drop by about a third within days.
The indictment recommends charging Diess, Potsch and the CEO at the time of the investigation, Winterkorn, who has now retired, according to a release from the prosecutor's office. It said a 636-page indictment has been filed with a court in Brunswick, which is considering the admissibility of the case brought under the Securities Trading Act.
Volkswagen, whose Frankfurt-traded shares hovered 2.5% lower in the hours after the news, said it was confident that no wrongdoing would be found should the case proceed. A decision could take weeks or months, an official at the prosecutor's office said.
"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," Hiltrud Dorothea Werner, Volkswagen's head of integrity and legal affairs, said in a statement.
The company's board of directors said in a separate statement that Volkswagen had been cooperating with U.S. authorities about the issue when the EPA unexpectedly made it public, depriving Volkswagen of the opportunity to inform investors of the investigation.
"The Board of Management of Volkswagen AG could not foresee this change in the approach of the U.S. authorities," the statement said. The board will convene Sept. 25 to discuss the matter.
In a two-page statement, Diess's defense lawyers said the charges were not justified by the facts and were "beyond comprehension." They acknowledged that Diess became aware of potential problems for the company within weeks of joining the group in July 2015 and that senior colleagues and legal experts had assured him that any impact would be contained.
"Dr. Diess was repeatedly assured that an economically controllable solution would be found by mutual agreement with the U.S. authorities," lawyers Tido Park and Tobias Eggers said, adding that Diess would "continue to carry out his duties in the company with absolute commitment."
Daniel Schwarz, an analyst at Credit Suisse, said in an interview that if the case is admitted, it is unlikely to have consequences for Diess during his term as CEO.
"I understand it could take several months for the court to decide whether to accept it and then several years to make a decision," Schwarz said. "The next three years are extremely critical for VW, ramping up EVs. Diess is needed for this period. I think investors want to make sure he is around for two to three years."
The emissions-cheating scandal, for which Volkswagen has publicly apologized, including through full-page newspaper ads across the U.S., has so far cost the group about €30 billion. Most of the outstanding litigation awaiting a ruling, including tens of thousands of complaints brought by individual customers, are in Germany, a company spokesman said.
At the heart of the scandal was Volkswagen's installation of engine management software in 11 million diesel engines across the group's brands. The company was able to register better exhaust emissions and comply with U.S. regulations by making the engine run cleaner when no steering adjustments were made — conditions that can usually only occur on laboratory test ramps and not on the road.
The latest news comes at an awkward time, just days after the company unveiled a new logo in a rebranding exercise designed to rebuild its image and regain consumer trust. The company is now dedicating such vast resources to making zero-emission electric cars that some observers have questioned the wisdom of the strategy.
Martin Winterkorn, who was CEO of Volkswagen when the scandal erupted, was charged by Brunswick prosecutors for serious fraud and in the U.S. over conspiracy and wire fraud. Rupert Stadler, CEO of Volkswagen's Audi brand at the time of the scandal, was detained and charged over his suspected role in the cheating, prompting his resignation in October 2018.

