Ex-Volkswagen CEO Martin Winterkorn charged in US over diesel scandal

Reuters Washington, DC, USA May 04, 2018, 08.02 PM(IST)

File photo of Martin Winterkorn. Photograph:( Reuters )

The United States has filed criminal charges against former Volkswagen AG boss Martin Winterkorn, accusing him of conspiring to cover up the German automaker`s diesel emissions cheating, in a rare attempt to prosecute a CEO for company actions.

The indictment reopens the question of whether other senior Volkswagen (VW) executives knew about the scandal, which has dogged Europe's biggest automaker for more than 2-1/2 years and led to a regulatory crackdown that is threatening thousands of jobs as customers increasingly shun diesel-powered cars.

The indictment, filed by the Department of Justice (DoJ) in secret in March, was unsealed in a US district court on Thursday as VW held its annual meeting in Berlin.

Winterkorn, 70, is charged with four felony counts, including conspiracy to defraud the United States, wire fraud and violating the Clean Air Act from at least May 2006 through November 2015, after VW admitted using illicit software that allowed diesel cars to emit excess pollution without detection.

Winterkorn resigned within days of the scandal becoming public in September 2015, but other senior executives who were on the company`s management board at the time continue to hold senior positions within the group. 

Hans-Dieter Poetsch, who was finance chief, is now chairman of the supervisory board. Herbert Diess, now group CEO, joined the company on July 1 2015 as head of the VW brand, only weeks before authorities divulged its cheating on Sept. 18, 2015.

Rupert Stadler, who was head of the Audi brand in 2015, has been given additional responsibilities for group sales in a revamp announced by Diess last month. Bernd Osterloh, the company`s powerful labour chief who also sits on the VW supervisory board, is still in place. 

VW has said the decision to install illegal "defeat device" software was taken in 2006 below the management board level.

"None of the members of the board of management had, at that time and for many years to follow, knowledge of the development and implementation of this software function," VW said in its 2017 annual report.

A lawyer for Winterkorn in Germany did not immediately comment. Winterkorn in January 2017 told German lawmakers he had not been informed of the cheating early, and would have halted it had he been aware.

A VW spokesman in Germany said the company "continues to cooperate with investigations" but does not comment about probes of individuals."

Winterkorn is unlikely to face US authorities. Germany`s Federal Justice Ministry said on Friday it does not extradite German nationals to countries outside the European Union.

Winterkorn is currently in Germany is unlikely to travel to a jurisdiction that might extradite him to the United States, a source familiar with his thinking said.

VW shares, which were trading ex-dividend on Friday, were 0.3 percent higher at 172.62 euros at 1204 GMT.

A heavy price

US Attorney General Jeff Sessions, Environmental Protection Administration (EPA) chief Scott Pruitt and other senior Trump administration official issued statements criticizing VW with the indictment.

"If you try to deceive the United States, then you will pay a heavy price," Sessions said.

In contrast with VW, no individuals were charged at Toyota Motor Corp in connection with its sudden unintended acceleration scandal or at General Motors Co for the cover-up of a deadly ignition switch defect.

The federal government`s decisions not to prosecute senior banking industry executives over the 2007-2009 financial crisis has also drawn fire from advocates of tougher measures to deter corporate wrongdoing.

VW has been fighting to move on from the scandal. It settled criminal charges with the US DoJ in 2017 by agreeing to a $4.3 billion payment, and has pledged to spend billions on new electric vehicles.

In total, it has agreed to spend more than $25 billion in the United States to address claims from owners, environmental regulators, states and dealers.

But prosecutors in Germany and the United States are continuing investigations into what senior executives at VW and its Porsche and Audi brands knew. They have also opened investigations into BMW, Mercedes-Benz and FiatChrysler related to their diesel emissions.

VW has also offered to buy back about 500,000 polluting US vehicles. Many are now stored in parking lots around the United States. 

All the way to the top

VW has never commented on when individual management board members learned about the defeat devices. 

The filing with the US district court said Winterkorn was briefed about the consequences of being caught using an illegal emissions device on July 27, 2015. 

VW disclosed to US authorities that it had used illegal software in its cars on Sept. 3, 2015, and did not inform investors until the US EPA alerted the public on Sept. 18. 

VW chose not to disclose the issue earlier because it felt the matter could be resolved amicably with US authorities, its annual report said. 

Sessions said in a statement that the charges against Winterkorn showed "Volkswagen`s scheme to cheat its legal requirements went all the way to the top of the company."

The indictment describes how VW employees presented PowerPoint slides to Winterkorn and "other senior VW AG management at an in-person meeting at VW`s headquarters in Wolfsburg." The meeting provided a "clear picture" of how the company was deceiving US regulators about software used to rig emissions tests of VW diesel vehicles, it said.

The indictment also alleges that VW employees recommended the company seek to get approval for 2016 diesel models from US regulators without revealing the existence of the cheating software. Winterkorn agreed to the plan, the indictment said.

The indictment also states Winterkorn was informed of the emissions cheating by a memo sent in May 2014. Winterkorn has said he did not learn of the cheating until late August 2015.

At its annual meeting, VW`s new CEO Herbert Diess vowed to make the carmaker "more honest", but investors called for outside vetting of steps to restore its reputation.

VW had initially suggested only lower-level executives knew of the cheating. But the indictment alleges Winterkorn agreed with other senior VW executives "to continue to perpetrate the fraud and deceive US regulators." 

In total, nine people have been charged and two former VW executives have pleaded guilty in the case and been sentenced to prison terms. One Italian citizen, former Audi manager Giovanni Pamio, is in Germany awaiting extradition.

Six former VW executives charged, including Winterkorn, are believed to be in Germany and have avoided facing US prosecutors.