Volkswagen bosses charged in Germany over diesel scandal

Volkswagen CEO Herbert Diess presented the company’s new ID.3 electric car in Frankfurt, Germany, on Sept. 9. He and two other top VW executives have been accused of deliberately informing markets too late about the huge costs that would result from the emissions-cheating scandal.
(Ronald Wittek/EPA-EFE/REX)

German prosecutors dealt a blow to Volkswagen’s efforts to put the 2015 emissions-cheating case behind it, charging the automaker’s chief executive, chairman and former CEO with stock manipulation for not telling investors at the time that the scandal was about to break.

The charges announced Tuesday could pose a major distraction for CEO Herbert Diess as he pushes ahead with the company’s shift toward zero-emissions vehicles and a new, more environmentally friendly image.

Diess, Chairman Hans Dieter Poetsch and former CEO Martin Winterkorn were accused of deliberately informing markets too late about the huge costs to VW that would result from the scandal, which erupted when regulators discovered that millions of diesel cars had been fitted with software designed to thwart pollution tests.


Winterkorn was previously charged in the scandal itself. Poetsch and Diess had not faced charges until now.

Volkswagen called the new allegations “groundless” and threw its support behind Poetsch and Diess. But the case could require Diess to spend time on his defense at a crucial time for the company.

Just days ago, Diess stood on stage at the Frankfurt Motor Show with the company’s new battery-powered vehicle, the ID.3, and showed off a new version of the VW logo to underscore the automaker’s transformation.

The new car is aimed at bringing zero-emissions driving to the masses. The vehicle is supposed to be carbon-dioxide neutral throughout its production chain.

President Donald Trump says his administration is revoking California’s authority to set auto mileage standards stricter than those issued by federal regulators.

Tido Park, a lawyer for Diess, told German news agency dpa that the indictment won’t prevent Diess from performing his duties as CEO.

It is not unprecedented for a German CEO to continue while fending off charges. Deutsche Bank’s Josef Ackermann had to spend two days a week in 2004 defending himself against breach-of-trust charges in connection with his duties as a board member at mobile phone company Mannesmann. He was acquitted.

Prosecutors said Winterkorn knew of the impending scandal and the potential financial damage since at least May 2015, Poetsch since late June of that year, and Diess since late July, less than a month after he became head of the company’s VW brand.

The scandal broke when the U.S. Environmental Protection Agency went public with it in mid-September 2015. That led to a drop in the automaker’s stock price.

The charges could bring up to five years in prison, authorities said.

Winterkorn resigned shortly after the scandal erupted. Poetsch was chief financial officer at the time and became chairman in late 2015. Winterkorn was succeeded as CEO by Matthias Mueller, who was then replaced by Diess in April 2018.

Volkswagen’s board said that based on expert legal advice, it had anticipated a negotiated settlement with the EPA and did not expect the agency to announce a violation. VW said that before the EPA announcement, “management had no concrete evidence that would have made immediate notification of the capital markets necessary.”

As a result, the board said, “the successful work with the chairman and the CEO should be continued.”

Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, said the charges could be more of a concern for Poetsch, since he was finance chief, while Diess was “only indirectly involved.”

Volkswagen stock fell 1.9% after the news.

Volkswagen admitted installing software that turned on pollution controls when vehicles were being tested and switched them off during everyday driving. That made it look as if the cars met tough U.S. limits on pollutants known as nitrogen oxides.

In all, some 11 million cars worldwide were equipped with the illegal software.

The scandal has cost Volkswagen more than $33 billion in fines, recall costs and civil settlements. The automaker apologized and pleaded guilty in the U.S., where two executives were sentenced to prison and six others, including Winterkorn, were charged, though they could not be extradited.

Separately, German prosecutors in April charged Winterkorn and four others with fraud in the emissions scandal. Prosecutors alleged that Winterkorn knew about the software since at least May 2015. Legal proceedings are still going on.