Back in March, the Securities and Exchange Commission (SEC) filed charges against VW and its former CEO, Martin Winterkorn, for defrauding U.S. investors by raising billions of dollars through the corporate bond and fixed income markets while making a series of knowingly deceptive claims about the environmental impact of the company’s so-called “clean diesel” vehicle offerings. Now, the government body is under fire from judges who are questioning the timing of the case against VW.
“My basic question is what took you so long,” said US District Judge Charles Breyer, when he questioned the SEC’s “lateness” in suing VW more than two years after the German automaker settled the US Justice Department’s criminal probe. He added that he was “totally mystified” as to why the SEC waited until 2019.
For its part, the SEC disclosed details of its probe in court filings and said it held extensive settlement talks with the automaker before deciding to file suit. In that disclosure, the SEC claims to have reviewed more than two million pages from VW, and said that they delayed immediately issuing formal subpoenas after VW agreed to voluntarily produce materials. In its court filing on Monday, the SEC said that its “staff worked hard and as quickly as possible under very difficult circumstances to complete an investigation into numerous different securities offerings conducted by a foreign company and three of its affiliates over many years,” and “treated VW fairly and afforded the company full process throughout its investigation.” The SEC also added that its challenges “included long delays by VW in producing documents and other information,” and “uncooperative witnesses who were reluctant or altogether refused to speak to the staff.”
I mean, the “uncooperative” part sounds real. I’d be a bit hesitant to talk about what I knew or didn’t know about Dieselgate as it unfolded. You know, since people are literally going to jail over it. It’s no wonder then, that former Volkswagen of America CEO Michael Horn refused to be interviewed by the SEC– even after the agency told his lawyers that the Justice Dept. would be willing to offer Horn “safe passage” in any upcoming trials. (!)
I wouldn’t said anything. Even with immunity, “snitches get stitches” becomes a very real concern when there are literally billions of dollars at stake, as there are here. The official SEC filing reads, “Volkswagen issued more than $13 billion in bonds and asset-backed securities in the U.S. markets at a time when senior executives knew that more than 500,000 vehicles in the United States grossly exceeded legal vehicle emissions limits,” so, like, they’re not talking about peanuts here. What about you guys?
You can read the official SEC summary of the case in the block quote, below, then let us know what you think of the SEC’s case against Volkswagen execs in the comments section at the bottom of the page.
SEC Charges Volkswagen, Former CEO With Defrauding Bond Investors During “Clean Diesel” Emissions Fraud
Washington D.C., March 2019 — The Securities and Exchange Commission today charged Volkswagen AG, two of its subsidiaries, and its former CEO, Martin Winterkorn, for defrauding U.S. 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 $13 billion in bonds and asset-backed securities in the U.S. 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 that 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.
“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 U.S. District Court for the Northern District of California, charges Volkswagen AG, its subsidiaries Volkswagen Group of America Finance, LLC and VW Credit, Inc., 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.
The SEC’s investigation was conducted by Kevin Wisniewski, Jake Schmidt, Amy Flaherty Hartman, and Daniel Nigro of the Complex Financial Instruments Unit and the Chicago Regional Office, under the supervision of Jeffrey Shank and Daniel Michael, Chief of the Enforcement Division’s Complex Financial Instruments Unit. The litigation is being led by Daniel Hayes.