Hush money?

At Audi, silence is golden

Audi Managers_1800
Earned handsomely from the scandal: Stadler, Hackenberg and Hatz. Sources: DPA, AP

In the course of the emissions-cheating scandal, Audi has showered cash on senior managers it has parted company with. That’s surprising because the luxury unit of VW is potentially facing hefty fines and a welter of compensation lawsuits. So shouldn’t it be preparing to get some money back from the people who got it into this mess?

The fact is, Audi is stuck in a dilemma. “A company can’t claim that it didn’t know anything and take its own employees to court at the same time,” said Manuel Theisen, a corporate governance expert at the University of Munich. But the carmaker’s management board, now led by interim boss Bram Schot, will eventually have to take action or risk being sued for damages by its own supervisory board, he said.

But at the moment, no one at Audi dares to charge its disgraced executives with wrongdoing. And these managers continue to receive fat payments from their erstwhile employers while clamming up about Dieselgate. The situation reeks of hush money.

Former development chief Ulrich Hackenberg, one of the main suspects in the Audi diesel probe, received glowing accolades when he left the company in December 2015, two months after the VW scandal broke. A reason wasn’t given for the engineer’s premature exit, though he had already been been suspended for two months with salary.

Paid millions for not working

And those paychecks kept coming. Handelsblatt has learned that Audi kept Mr. Hackenberg on the payroll until his contract expired in 2018, to the tune of €5 million ($5.8 million). The last payment is believed to have been made in June.

That seems to be standard practice at Audi. When Mr. Hackenberg left, Audi appointed as his successor Stefan Knirsch, who resigned in September 2016 over emissions-cheating. Audi paid him €3.8 million “due to the premature departure from the management board,” as it said in its annual report.

Mr. Knirsch too is under investigation, and he has plenty of company: Prosecutors are investigating 20 suspects at Audi’s headquarters in Ingolstadt.

Another chief suspect is Wolfgang Hatz, Audi’s head of engine development who joined the carmaker in 2001. He is seen as a confidant of Martin Winterkorn, who was at the helm when it emerged the carmaker had cheated on emissions tests.

In February 2011, Mr. Hatz became management board member of research and development at VW unit Porsche, a post that gave him an overview of diesel technology across the VW group. There can’t be many managers who know more about VW’s engines – and how they were manipulated.

Audi Jahrespessekonferenz Stefan Knirsch Vorstandsmitglied verantwortlich fuer den Bereich Technisc
Audi's ex-manager Stefan Knirsch, paid €3.8 million for departing early. Source: Imago

Mr. Hatz signed an agreement in 2016 canceling his contract that earned him more than €12 million. Arrested in September 2017, he was tight-lipped during questioning. He was in investigative custody for 9 months — an unusually long time. He remains a suspect but was released last month after paying €3 million for bail.

Ulrich Weiss was head of diesel engine development when Audi suspended him in November 2015. When Mr. Weiss was fired in February 2017, he took legal action against his dismissal and provided a labor court in Heilbronn with documents that incriminated Rupert Stadler, then Audi’s boss. Mr. Weiss is believed to have demanded €6 million from Audi in the labor dispute. Audi reached a settlement with him in September 2017, and since then, Mr. Weiss has fallen silent.

It’s a similar story with his former colleague Giovanni Pamio, a diesel development manager whom US investigators have accused of co-inventing the so-called “defeat devices” that disguised the real level of emissions. After Mr. Pamio was arrested, he presented prosecutors with his version of the diesel manipulation story, which turned him into a key witness against Audi.

In spring 2018, shortly before the Heilbronn court was due to hear Mr. Pamio’s case against his former employer, the hearing was cancelled. Audi had paid him millions of euros not to repeat his written testimony in a court of law.

Out of court, out of trouble

Is this legal? Lawyers say no one can be forced to file lawsuits. The settlements Audi has reached with suspects in the diesel case may look suspicious, but “out-of-court settlements are often in the interests of both parties,” said Oliver Grimm, a labor lawyer at law firm Vangard. Lawsuits often take many months and reveal details the companies would prefer remain private. “Usually neither side has any interest in that,” Mr. Grimm said.

But the deals appear to run counter to Audi’s pledge to investigate the case. In September 2016, Mr. Stadler said: “There is a rigorous investigation underway and that’s the driving force.”

Now Mr. Stadler himself is in custody. Last month the Audi executive, who also sits on the VW executive board, was arrested at his home under suspicion of committing fraud in Germany’s long-running diesel emissions scandal, and was denied bail for fear he would interfere with the investigation. With the help of a tapped phone, prosecutors said they overheard Mr. Stadler trying to influence witnesses.

Audi may have paid a ton of money to people who could help explain what happened, but the company didn’t pay them to shed light on the case.

Markus Fasse reports from Handelsblatt’s Munich bureau. Sönke Iwersen leads Handelsblatt team of investigative reporters including editor Volker Votsmeier. David Crossland and Jeremy Gray adapted this story into English for Handelsblatt Global. To contact the authors: fasse@handelsblatt.comiwersen@handelsblatt.com and votsmeier@handelsblatt.com

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