who knew?

Former VW boss was informed earlier of diesel emissions cheating

Winterkorn wusste früher von Diesel-Manipulationen
Liars poker? Source: DPA

A court in Stuttgart has ordered Volkswagen to supply two documents that suggest its former CEO, Martin Winterkorn, knew about the diesel emissions scandal more than a year before it became public in September 2015.

Two documents show that Mr. Winterkorn was informed in May 2014 about the cheating devices fitted into diesel cars, which artificially lowered toxic emissions during lab tests and increased them on the road. The letters, seen by Handelsblatt, were sent by the quality control chief and explicitly list emissions as an issue to be addressed.

VW was unwilling to comment on the documents. The new documents could be disastrous for the company’s current legal stance, namely that its top managers knew nothing of the case. Volkswagen was unwilling to say what the revelations could mean for liability claims against Mr. Winterkorn. Some experts say that the VW supervisory board should hold Mr. Winterkorn and his fellow board members accountable, otherwise the board itself could be liable.

Much hangs in the balance for the company over the question of who knew what when. Mr. Winterkorn has insisted that he didn’t learn of the cheating until early September, while the full board has said it could only assess the financial impact after California’s Environmental Protection Agency revealed the manipulation on September 18, 2015. Four days later the company issued a note to shareholders.

The fall of the share price after the company conceded the cheating cost shareholders some €10 billion.

The consequences were catastrophic for the company. The scandal has cost €25 billion so far. Numerous managers have lost their jobs and some have been jailed. The company’s share price fell 40 percent on September 21 and 22 and lawsuits and investigations continue around the world.

Mr. Winterkorn, who resigned on September 23, received a memo on May 23, 2014, about US emissions irregularities, VW said two years ago. However, there was uncertainty whether the then-CEO actually read the memo at the time, VW said.

VW shareholders insist they should have been informed sooner and are suing for the company’s failure to do so. Legally shareholders must be informed in advance about issues that significantly affect the share price. The fall of the share price after the company conceded the cheating cost shareholders some €10 billion.

Stuttgart’s regional court is now hearing a case brought by private and institutional investors. Prosecutors want to see a letter sent on May 23, 2014, by Frank Tuch, the former chief of quality assurance, addressed to Mr. Winterkorn and seen by Handelsblatt. It lists the problems that Mr. Tuch said the company should address directly. One of them is the real levels of nitrogen oxide, a toxic gas, that cars emit on roads.

Mr. Tuch wrote to Mr. Winterkorn: “The University of West Virginia and CARB and the International Council on Clean Transportation (ICCT) ran emissions tests in real driving conditions. The results show VW cars emit 15-35 times more NOx than is legally allowed.” Mr. Tuch, chief quality controller, added that the company had to act right away, and that the authorities were on the case: “The ICCT passed on the test results and asked for a comment.” He also wrote that he would keep his boss informed of any further developments and the outcome of talks with the authorities.

A few days later, Mr. Tuch received a note from the VW’s former head of a product safety committee, Bernd Gottweis, who wrote that “a thorough explanation for the significantly higher nitrogen oxide emissions cannot be given to the authorities.” Mr. Tuch feared that the authorities would investigate VW’s systems to see whether they were fitted with defeat devices that acted differently in test conditions compared to roads.

Andreas Tilp, a lawyer representing 150 shareholders at the court in Stuttgart, said the documents expose the company, stating that there was explicit mention of the defeat device in Mr. Gottweis’ note. In Mr. Tilp’s view, Mr. Winterkorn’s insistence that he knew nothing of the devices in May 2014 is no longer believable, he told Handelsblatt.

The latest developments in Stuttgart also affect a second VW market manipulation case running in Braunschweig, with €9 billion demanded by shareholders. In this case, Mr. Tilp represents asset manager Deka.

When Mr. Winterkorn resigned, VW’s supervisory board underlined that he had known nothing of the scandal that enveloped the company. Mr. Winterkorn himself said that he was horrified by the revelations and the extent to which they affected the company. Although he had known nothing of the devices, he wanted to take responsibility, in the company’s interests.

This amicable departure also benefited Mr. Winterkorn financially; he was best paid CEO in Germany at the time, earning €16 million per year and was eligible for a payout with the cancellation of his contract. VW was also going to pay up to €28 million as pension.

Volker Votsmeier and Sönke Iwersen are investigative reporters for Handelsblatt. To contact the authors: votsmeier@handelsblattgroup.com, iwersen@handelsblattgroup.com

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