Volkswagen CEO Targeted in Emissions Cheating Probe -- Update
May 17 2017 - 4:00PM
Dow Jones News
By William Boston
BERLIN -- German prosecutors are investigating whether
Volkswagen AG Chief Executive Matthias Müller and other key board
members and executives at the company's biggest shareholder
adequately disclosed financial liabilities related to the car
maker's emissions-cheating scandal.
The move is the first time Mr. Müller has been named in a
criminal probe tied to the U.S. determination that Volkswagen had
used "cheat devices" in its diesel-engine cars. Mr. Müller has
presided over Volkswagen's operational and financial recovery, but
the newly disclosed investigation threatens to complicate the auto
maker's efforts to move forward.
State prosecutors said Wednesday that Mr. Müller, his
predecessor Martin Winterkorn, and current Porsche SE Chairman Hans
Dieter Poetsch are under investigation on suspicion they
intentionally withheld information from investors of Porsche SE
ahead of a public "notice of violation" by the U.S., stemming from
the emission issue, on Sept. 18, 2015.
At the time, all the three executives were on the management
board of Volkswagen and supervisory board of Porsche SE, a listed
company in Germany that manages the 52% stake in Volkswagen owned
by the heirs of Beetle inventor Ferdinand Porsche. Mr. Müller also
was the CEO of sports car maker Porsche AG, a unit of Volkswagen,
at that time.
Various Volkswagen executives and board members were briefed
months before the notice that U.S. environmental regulators had
raised questions about the auto maker's diesel-emissions level.
Neither Volkswagen nor Porsche SE disclosed that to investors, nor
did they disclose any potential liabilities should the U.S. decide
to pursue a formal probe.
The Stuttgart probe isn't looking at whether Mr. Müller is
suspected of playing a role in the diesel scandal itself.
Volkswagen has admitted to a broad conspiracy to mislead regulators
about the level of emissions produced by the car maker's diesel
engines over several years.
Volkswagen has tried to draw a line under the scandal, in part
by handing management to an untainted team led by Mr. Müller. The
new probe could also add momentum to thousands of investor lawsuits
in Germany that are seeking more than EUR8 billion ($8.9 billion)
in damages from car maker.
The U.S. notice of violation sent shares in both Volkswagen and
Porsche SE sharply lower. By Sept. 22, 2015, when Volkswagen
published a warning to shareholders and took a EUR6.5 billion
charge against earnings, its shares had fallen 38%. German
prosecutors also could allege stock-market manipulation if they
found management disclosure to be inadequate.
The opening of an investigation by a prosecutor doesn't indicate
that the people affected will be charged or convicted.
A spokesman for Porsche SE said the charge was unfounded and
that the company fulfilled its obligations to inform financial
markets in a timely fashion. The spokesman said Messrs. Müller and
Pötsch won't comment on the investigation. Mr. Winterkorn's
attorney didn't immediately respond to requests for comment.
Prosecutors have opened a similar probe into stock-market
disclosures at Volkswagen itself. Volkswagen officials have argued
repeatedly that until U.S. authorities issued their formal notice,
management wasn't aware of the substantial fines and penalties that
might come with that -- and thus couldn't disclose any accurate
estimate of liabilities.
Volkswagen has since pleaded guilty in the U.S. to conspiracy to
commit fraud in connection with the emissions cheating and has
agreed to pay nearly $25 billion in fines, penalties, legal fees
and compensation for customers. Volkswagen admitted it installed
software that tricked testing equipment into picking up less
emissions from its diesel-powered cars in the U.S. than they were
actually spewing out.
The Stuttgart prosecutor declined to elaborate on the
justification for its investigation of Mr. Müller and other Porsche
SE executives, but said: "There is cause to believe that the
accused were intentionally late to inform shareholders about the
financial consequences, especially for shareholders of Porsche SE,
of the software manipulation of diesel vehicles," the Stuttgart
state's attorney said in a statement.
Write to William Boston at william.boston@wsj.com
(END) Dow Jones Newswires
May 17, 2017 16:45 ET (20:45 GMT)
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