US Sues Volkswagen and ex-CEO for Fraud over Dieselgate

US Sues Volkswagen and ex-CEO for Fraud over Dieselgate

The diesel emissions scandal, better known as ‘Dieselgate’, threatened to engulf Volkswagen, one of the biggest car manufacturers in the world. Although the car maker may have left it behind with a range of new strategies, it is a spectre that is not going to go away anytime soon. In a new development, the United States has decided to sue Volkswagen and its former Chief Executive Officer Martin Winterkorn of fraudulent behaviour during pertaining to that affair. According to the US financial markets regulator, the Securities and Exchange Commission (SEC), the company continued to sell bonds and associated securities to investors despite knowing full well that Volkswagen had cheated on the emission tests.

According to the lawsuit filed by the SEC, Volkswagen sold around $13 billion worth of bonds from the period starting in April of 2014 until May of 2015. However, it was a time when the executives in the company were eminently aware of the fact that they had used spurious software that allowed them to cheat on the emission tests in the US. The SEC has called it a massive fraud. It is important to point out that the Volkswagen stock price dropped by as much as 40% once the scandal was uncovered.

The SEC lawsuit added that “[Volkswagen] repeatedly lied to and misled United States investors, consumers, and regulators as part of an illegal scheme to sell its purportedly ‘clean diesel’ cars and billions of dollars of corporate bonds and other securities in the United States.” In addition to that, the then CEO Winkertom has also been sued. At the time, he had resigned as soon as the scandal became public, but it is unlikely that he is going to stand trial in the US. Germans are not extradited by the state, as a policy.

It is important to point out though that Volkswagen is not off the hook in its native Germany either. They are currently fighting a lawsuit in Germany against investors who are seeking 9.26 billion Euros in damages. Regarding its conduct in the US, the company has already paid billions of dollars in fines. A BBC business analyst stated, “It has already paid out more than $30bn in the US alone, in fines and other penalties, and to buy back affected vehicles. The SEC’s lawsuit shows that the US authorities are not prepared to let the company off the hook just yet.”

Leon Teague has recently joined FinanceOrange team as a Sub-Editor. He has years of experience in writing about finance industry and also worked for local newspapers previously. He is an intense traveller. In his free time, he loves to explore unexplored places.

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