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Former-Volkswagen CEO and other top management executives must defend lawsuit over the VW cheating emissions scandal
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When former VW CEO, Martin Winterkorn, resigned following the emissions scandal in 2015, I’m sure he didn’t expect to be defending a lawsuit himself.
A U.S. District Judge has ruled that Mr Winterkorn must defend a suit that is brought by American pension fund investors. The suit alleges that VW are guilty of not warning or informing the market/investors ‘in a timely fashion’ about the emission scandal; instead leaving investors to find out about their pension funds after the scandal had been publicised and splashed across the news.
Following the publication of VW’s emissions scandal in September 2015, the lawsuit notes that VW’s market value for shares fell by $63 billion (£52 billion).
Mr Winterkorn is accused of knowing about the German automaker’s cheating. As the Chief Executive, they say he should’ve informed his investors as soon as he knew.
The suit continues to note that VW understated possible financial liabilities of the investors, “…as a result of its known emissions non-compliance”.
The investors allege that VW committed securities fraud by cheating emissions and failing to inform them of the same. Securities fraud is a type of serious white collar crime which uses deceptive practices to induce investors to buy shares on the basis of false information. As a result of the false information, this leads investors to make a loss on their purchased shares.
The plaintiffs had bought shares through American Depositary Receipts (ADR), which is a simple way for investors to invest in companies whose shares are listed abroad (e.g. Germany, in this case), giving them a form of equity ownership.
In response to the accusations, a spokesman at VW’s German headquarters said, “VW is convinced that the accusations raise by buyers of the corporate securities (so-called American Depositary Receipts) lack any foundation”. VW has made it clear that they feel they don’t hold any liability towards the investors in this case and continued to note that, “it’s our intention to make this clear in the further course of proceedings”.
Well, it’s the intention of affected investors to recover some of their losses, which according to the plaintiffs amount to “many hundreds of millions of dollars [pounds]”, arising out of the cheating of the German automakers.
If the investors are successful with their claim, this could potentially raise the cost of the remedial action beyond the initial $18 billion (£14 billion).
Though VW believes that the case should be heard in the company’s home country, U.S. District Judge Charles Breyer ruled that the U.S., “has an interest in protecting domestic investors against securities fraud”. It makes sense for the case to be heard in the U.S. as domestic investors are directly affected.
Judge Breyer has also dismissed pleas from Mr Winterkorn, former head of VW’s unit, Michael Horn and VW Brand Chief, Herbert Diess, to discharge the cases against them individually. Mr Winterkorn continues to declare he was “not aware of any wrongdoing on my part”.
Well, if that’s the case, Mr Winterkorn, there shouldn’t be an issue defending the case!
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