Forever Dieselgate Alarm grows at VW’s slow Dieselgate investigation

Senior figures on VW’s supervisory board are alarmed at the slow pace of its internal Dieselgate investigation, highlighted by US criminal charges brought last week against its former CEO.
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Looks stormy out there.

There is increasing disquiet on Volkswagen’s supervisory board that the company’s internal Dieselgate investigation is a half-hearted and moving far too slowly. Senior board members told Handelsblatt that the investigation may continue until the middle of next year.

“Almost four years is simply too much,” complained one board member, saying chair Hans Dieter Pötsch and CEO Herbert Diess must force the issue. The company’s sluggish internal investigation is a stark contrast to last week’s announcement by the US Department of Justice that it will prosecute former CEO Martin Winterkorn, who in theory could face 25 years in prison.

Reports this weekend suggested Volkswagen was considering legal action against its former CEO, and may seek damages of up to €100 million ($119 million). However, any such decision will depend on the internal inquiry, Handelsblatt learned.

The VW leadership is accused of remaining far too close to Mr. Winterkorn, who now faces US criminal charges.

At the same time, sources on the board say there is currently no basis for a VW damage claim against Mr. Winterkorn, who resigned in September 2015, shortly after revelations that VW engineers systematically falsified diesel emissions data. Mr. Winterkorn has always denied any prior knowledge of the scheme.

With US charges ratcheting up the pressure on Mr. Winterkorn, the VW board is also accused of remaining too close to the man who once ran the company like an autocrat. The board promised to investigate “unconditionally and without regard to individuals,” but many have remained in close contact with Mr. Winterkorn.

Senior VW figures even attended Mr. Winterkorn’s 70th birthday party last year, including the heads of the Porsche and Piëch families, which own a majority stake in the VW Group, and Mr. Pötsch, the VW chairman, who reportedly arrived in a company jet.

Observers are therefore questioning VW’s commitment to reckoning with Dieselgate, which has so far cost more than $25 billion in fines, compensation payments and other obligations. The company continues to fight a legal battle to prevent publication of a preliminary internal inquiry.

Though Mr. Winterkorn is unlikely to ever reach a US court, since Germany almost never extradites its citizens to non-European Union countries, the case will restrict his travel possibilities, in effect confining him to Germany. In addition, prosecutors in the city of Braunschweig are currently investigating the former CEO on possible fraud charges.

As the board examines the possibility of legal action against Mr. Winterkorn, it will be acutely aware that such a lawsuit could help VW shareholders who want to sue the company for losses suffered when the share price tanked after Dieselgate. Shareholders representatives welcomed charges against Mr. Winterkorn, saying it boosted their case for compensation by focusing attention on senior executives, not middle-ranking engineers.

The US and German lawsuits could become expensive for the former CEO. In 2009, in Germany’s biggest-ever case of a company suing its own executives, a former Siemens CEO, Heinrich von Pierer, agreed to pay the company €5 million in compensation for losses associated with a corruption scandal.

Mr. Winterkorn is a wealthy man, and is sure to have liability insurance. But a claim of €100 million could easily bankrupt him. But if fines applied to several senior executives, severe financial problems could also result for insurance companies.

Martin Murphy covers the steel, car and defense industries for Handelsblatt. Stefan Menzel writes about the auto industry focusing on Volkswagen. Volker Votsmeier is an investigative reporter with Handelsblatt. To contact the authors: [email protected], [email protected], [email protected]