The Securities and Exchange Commission (SEC) has charged Volkswagen, two of its subsidiaries, and its former CEO, Martin Winterkorn, for allegedly defrauding US investors during the so-called Dieselgate scandal.
Investigators claim the company raised 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 US regulator’s complaint, from April 2014 to May 2015, Volkswagen issued more than $13 billion 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 US grossly exceeded legal vehicle emissions limits, exposing the company to massive financial and reputational harm.
The complaint alleges that Volkswagen made false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and VW's financial standing.
The complaint says that 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.
Stephanie Avakian, co-director of the SEC’s division of enforcement, said: “Issuers availing themselves of American capital markets must provide investors with accurate and complete information.
“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 U.S. District Court for the Northern District of California, charges Volkswagen, its subsidiaries Volkswagen Group of America Finance and VW Credit, and Winterkorn with violating the anti-fraud provisions of the federal securities laws.
The SEC complaint seeks permanent injunctions, removal of related gains with prejudgment interest, and civil penalties. The complaint also seeks an officer and director bar against Winterkorn.
A Volkswagen spokesperson said: "The SEC’s complaint is legally and factually flawed, and Volkswagen will contest it vigorously. The SEC has brought an unprecedented complaint over securities sold only to sophisticated investors who were not harmed and received all payments of interest and principal in full and on time.
"The SEC does not charge that any person involved in the bond issuance knew that Volkswagen diesel vehicles did not comply with US emissions rules when these securities were sold, but simply repeats unproven claims about Volkswagen AG’s former CEO, who played no part in the sales.
"Regrettably, more than two years after Volkswagen entered into landmark, multibillion-dollar settlements in the United States with the Department of Justice, almost every state and nearly 600,000 consumers, the SEC is now piling on to try to extract more from the company.”