The US Securities and Exchange Commission (SEC) said it had charged Volkswagen AG, two of its subsidiaries, and its former CEO, Martin Winterkorn, for defrauding US investors, raising billions of dollars through the corporate bond and fixed income markets while making a series of deceptive claims about the environmental impact of the company’s “clean diesel” fleet.
According to the SEC’s complaint, from April 2014 to May 2015, Volkswagen issued more than US$13bn in bonds and asset-backed securities in the US markets at a time when senior executives knew that more than 500,000 vehicles in the United States grossly exceeded legal vehicle emissions limits, exposing the company to massive financial and reputational harm. The complaint alleges Volkswagen made false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and VW’s financial standing. By concealing the emissions scheme, Volkswagen reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company, according to the complaint.
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“Issuers availing themselves of American capital markets must provide investors with accurate and complete information,” said Stephanie Avakian, co-director of the division of enforcement. “As we allege, Volkswagen hid its decade-long emissions scheme while it was selling billions of dollars of its bonds to investors at inflated prices.”
The SEC’s complaint, filed in the US District Court for the Northern District of California, charges Volkswagen AG, its subsidiaries Volkswagen Group of America Finance and VW Credit, and Winterkorn with violating the antifraud provisions of the federal securities laws. The SEC complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties. The complaint also seeks an officer and director bar against Winterkorn.
Volkswagen told the New York Times in a statement it had raised money from sophisticated investors who got back their principal and interest, and that the SEC “is now piling on to try to extract more from the company”.
“The SEC’s complaint is legally and factually flawed, and Volkswagen will contest it vigorously,” the statement read.
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By GlobalDataThe paper noted Winterkorn has denied wrongdoing in the past, including in testimony in front of the German parliament.
