Dieselgate Fallout

'When' issue prompts deeper probe into VW emissions

VW – Software-Update
Let there be light. Source: DPA

For German investors and consumers, it has long been a source of frustration that Volkswagen’s diesel transgressions have been investigated and punished in the United States, but not in its home country. That, however, may soon change. The so-called Dieselgate scandal took a fresh turn on Wednesday when a German court ruled an independent auditor should be appointed to investigate exactly when the carmaker knew about its emissions issues.

Volkswagen’s main shareholders, the Porsche-Piëch families and the state of Lower Saxony, had blocked requests by the DSW and SdK investor lobby groups for a special auditor to delve into its cheating of US diesel-engine tests. But a regional court in Celle, about a half-hour’s drive from VW’s base in Wolfsburg, said such an auditor must be appointed – and that the decision cannot be appealed by the carmaker.

Shortly after the Dieselgate scandal broke in September 2015, VW hired US law firm Jones Day and advisor-auditors Deloitte to investigate the circumstances of its wrongdoing, and who was responsible. Although VW pledged to improve transparency, it never published the findings, which formed the basis for a $4.3-billion (€3.7-billion) settlement with the US Justice Department.

“At last, light will be shed on the darkness that has shielded VW for so long.”

Klaus Nieding, vice-president of the DSW investor lobby

For Klaus Nieding, who is representing institutional investors suing VW for compensation, it is an extraordinary victory. “This is an extremely good day for the VW shareholders who have lost a lot of money in the wake of the diesel scandal,” said Mr. Nieding, DSW’s vice president. “At last, light will be shed on the darkness that has shielded VW for so long.”

VW sees things differently. In an emailed statement, the carmaker said it had taken note of the court decision, which it described as “unfounded,” adding it would carefully consider further steps. In the meantime, the court has already appointed Rüdiger Reinke, of the auditing firm Rölfs, to be the special auditor.

Mr. Reinke will examine when VW’s top management board first learned of the emissions deception and whether it promptly disclosed the possible financial damage to investors. German securities law requires firms to publish any market sensitive news in a timely fashion, and prosecutors are already investigating the matter. VW, however, denies any misconduct and maintains its management complied with German disclosure rules.

Overall, VW shareholders are claiming damages of around €9 billion due to VW’s allegedly late disclosure of the emissions situation. The scandal, which has cost the automotive group about €30 billion, was first brought to light by US environmental authorities, rather than by VW itself.

Following the ruling in Celle, prosecutors in Braunschweig and Stuttgart have sprung into action. According to Handelsblatt, VW’s former chief executive Martin Winterkorn, erstwhile supervisory board chief Hans Dieter Pötsch, and board member Herbert Diess are on their accused list – as well as VW’s current boss, Matthias Müller, who also sits on Porsche’s management board. More than two years into the scandal, VW may yet face greater penalties for its actions in Germany than it did in the United States.

Jeremy Gray is an editor for Handelsblatt Global. Volker Votsmeier is an investigative reporter for Handelsblatt. To contact the authors: j.gray@vhb.devotsmeier@handelsblatt.com

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