SEC sues Volkswagen, Winterkorn over 'Dieselgate'

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WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission sued Volkswagen AG and its former chief executive Martin Winterkorn over the German automaker’s diesel (gasoil) emissions scandal late Thursday, accusing the company of perpetrating a “massive fraud” on U.S. investors.

SEC sues Volkswagen, Winterkorn over 'Dieselgate'

A Volkswagen logo is seen on a new car model at the 89th Geneva International Motor Show in Geneva, Switzerland March 5, 2019. REUTERS/Denis Balibouse

The SEC said in its complaint filed in San Francisco that from April 2014 to May 2015, Volkswagen issued more than $13 billion in bonds and asset-backed securities in U.S. markets at a time when senior executives knew that more than 500,000 U.S. diesel (gasoil) vehicles grossly exceeded legal vehicle emissions limits.

Volkswagen “reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company,” the SEC said.

The suit seeks to bar Winterkorn from serving as an officer or director of a public U.S. company and recover “ill-gotten gains”. Winterkorn was charged by U.S. prosecutors in 2018 and accused of conspiring to cover up the German automaker’s diesel (gasoil) emissions cheating.

He remains in Germany.

Volkswagen said the SEC 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 automaker added that the SEC “does not charge that any person involved in the bond issuance knew that Volkswagen diesel (gasoil) vehicles did not comply with U.S. emissions rules when these securities were sold” but repeats claims about Winterkorn “who played no part in the sales.”

Volkswagen has agreed to pay more than $25 billion in the United States in connection with the three-and-a-half-year old scandal, paying claims from owners, environmental regulators, states and dealers, and has offered to buy back about 500,000 polluting U.S. vehicles.

VW admitted in September 2015 to secretly installing software in 500,000 U.S. vehicles to cheat government exhaust emissions tests and pleaded guilty in 2017 to felony charges. In total, 13 people have been charged in the United States, including Winterkorn and four Audi managers.

A lawyer for Winterkorn could not immediately be reached early Friday.

The SEC action also names VW Credit.

Reporting by David Shepardson; Editing by Muralikumar Anantharaman and Shreejay Sinha