DIESELGATE AFTERMATH Germans Finally Join In The Great VW Hunt

German prosecutors on Friday stepped up their investigation of VW. But why did it take them so much longer to get on the case than U.S. lawyers?
Quelle: Bloomberg
VW's former CEO Martin Winterkorn (center left) faces a fraud investigation in Germany and potentially in the United States.

In early January, the first photographs of Oliver Schmidt emerged. Arrested by the FBI in Miami, the 48-year-old Volkswagen manager wore handcuffs and leg shackles for his preliminary court appearance. He now sits in a cell, contemplating a possible 169-year sentence.

U.S. authorities have been cracking down hard in the Dieselgate scandal, which has enveloped Volkswagen for 18 months since it first emerged the company had installed software to falsify diesel emissions data in its cars.

In the United States, the company has already faced fines of more than €20 billion, around $21.33 billion. They are questioning key witnesses and pursuing mid-ranking VW managers like Oliver Schmidt, formerly the company’s head of U.S. compliance, who unwisely returned to the United States to celebrate his birthday. Prosecutors seem to be gradually moving higher and higher up the VW management hierarchy.

In Germany, at first glance there is less on the horizon. Prosecutors in Braunschweig, the nearest large city to VW’s Wolfsburg headquarters, say it is possible that “in the coming year one or two cases may be completed.” There have been no fines to date and the country’s transport minister, Alexander Dobrindt, has kept his involvement in Dieselgate so far to a minimum: The government has kept much of its information confidential, opposed a ban on diesel cars, and promised “cooperation” with the car industry in the aftermath.

So the popular image is of a vigorous American response versus sleepy, do-nothing German officials. But looking closely, things are more complicated.

It is our obligation at the Justice Department to hold lawbreakers accountable, on the street corner or in the boardroom. Sally Yates, U.S. Deputy Attorney General

While Germany’s politicians seem determined to give VW an easy ride, it may be a different story with the country’s prosecutors: They could yet pose a real danger to Volkswagen, and to individual executives.

Let’s start with a look at politicians on both sides of the Atlantic. In America, the arrests of VW managers followed new guidelines issued by deputy U.S. attorney general, Sally Yates, in September 2015, entitled “Individual Accountability for Corporate Wrongdoing.” They outlined a new policy of pursuing individual managers, as well as companies, in cases of large-scale economic crimes.

“Crime is crime,” Ms. Yates said at the time. “And it is our obligation at the Justice Department to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom.”

Just two weeks after the Yates memo, Volkswagen’s scandal broke into the open. The U.S. Environmental Protection Agency published details of a massive falsification of emissions data by VW, setting a number of legal investigations and lawsuits in motion.

After 18 months, the results are beginning to pile up: Earlier this month, six executives were indicted in the United States, including Heinz-Jakob Neusser, the former head of development for the VW brand. A settlement with the EPA and California authorities has seen VW diesel car owners win up to $10,000 in compensation, and Volkswagen has been forced to pay for several environmental projects.

In Germany, things are murkier. Mr. Dobrindt, the transport minister, personally blocked an attempt to introduce American-style class-action lawsuits in Germany, no doubt to Volkswagen’s relief.

In fact, the conspicuous lack of action from various ministries, as well as the Federal Motor Transport Authority that regulates the industry, led the German parliament to establish a committee of inquiry into the scandal. Last week saw testimony from former VW chief executive Martin Winterkorn, who denied any prior knowledge of emissions cheating.

But Mr. Winterkorn will not yet have breathed a sigh of relief. He knows trouble is still brewing for him in Germany, if not from politicians, then from German prosecutors. These may have a less media-savvy public presence than their American colleagues, but they are making steady progress. That became clear on Friday, when Braunschweig’s office announced an expanded fraud investigation into Mr. Winterkorn and the company.

German state prosecutors in a number of cities currently have open cases against dozens of accused. Some complain of the highly-public U.S. investigations: “It makes our job harder when so many supposed results of investigations are published,” Klaus Ziehe, spokesperson for the Braunschweig prosecutor, told Die Zeit, suggesting this could influence later witness testimony.

From the outset, it has not only been a question of gathering data, but also of sorting through the vast amounts of information. Investigators have seized several terabytes of information. If it were all printed out, this would make a pile 20 kilometers long. Dozens of witnesses and accused have been questioned by the 10 prosecutors on the case, with some of the transcripts running to 60 and more pages.

The work of the German investigators has in fact fed into the U.S. prosecutions. Die Zeit has learned that investigators from the Department of Justice were sometimes present at the interrogation of witnesses and defendants in Braunschweig.

It makes our job harder when so many supposed results of investigations are published. Klaus Ziehe, spokesperson for Braunschweig public prosecutor

Above all, the different speeds of prosecution cases have to do with when the cases began: The Germans launched their investigation when the scandal broke in September 2015, whereas the California air pollution agency, CARB, began as early as May 2014.

By now, German prosecutors are investigating a wide range of Dieselgate cases. There are now 37 defendants facing possible charges of fraud and unfair competitive practices, prosecutors said Friday, up from the 21 announced earlier. In another case, charges of the misrepresentation of fuel data are being prepared against six VW employees.

Things could get very expensive for Volkswagen if it can be proven that top management learned of the Dieselgate fraud in July 2015, as the American authorities are suggesting, and not September of that year, as had always been claimed. That would mean that former executives like Mr. Winterkorn and Hans Dieter Pötsch, the company’s CFO at the time of the scandal and now its non-executive supervisory board chairman, as well as the VW core brand boss Herbert Diess would possibly have informed markets too late and left themselves liable to prosecution.

Investors in the United States and Germany are also already suing the company for billions. And one VW lawyer stands accused of encouraging employees to destroy documents.

The different speed of legal cases in America and in Germany also has to do with the two country’s legal systems. In Germany it is more difficult to prosecute individual managers than in the United States. To get an executive behind bars, personal misconduct has to be proved, not just corporate bad behavior. Even in the United States, Oliver Schmidt is the first substantial case to come to court.

Earlier this month, Sally Yates, the U.S. deputy attorney general, made another public statement on the case. When Volkswagen agreed to guilty pleas on the three criminal counts it faced, she said: “This is really a reflection of the fact that faceless multinational corporations don’t commit crimes, flesh-and-blood people commit crimes.”

Oliver Schmidt may be the next to face the music.


This article first appeared in the weekly newspaper Die Zeit. To contact the authors: [email protected]