SEC Charges VW, Ex-CEO Winterkorn With Defrauding U.S. Bond Investors -- 2nd Update

Date : 15/03/2019 @ 21:16
Source : Dow Jones News

SEC Charges VW, Ex-CEO Winterkorn With Defrauding U.S. Bond Investors -- 2nd Update

By William Boston 

BERLIN -- The U.S. Securities and Exchange Commission charged Volkswagen AG and its former Chief Executive Martin Winterkorn with defrauding U.S. investors in connection with the emissions cheating scandal that the auto maker is trying to leave in the past.

The surprise move by the SEC, which also charged two of VW's units, comes just over two years after Volkswagen settled civil and criminal matters with U.S. authorities, agreeing to pay a criminal fine of $2.8 billion after pleading guilty to violating U.S. laws.

After settling civil complaints, other fines and legal fees, the diesel scandal has cost Volkswagen around $25 billion so far with some civil cases pending in Germany.

The SEC alleges that Volkswagen defrauded bond investors, raising billions of dollars through corporate-bond and fixed-income markets while making a series of deceptive claims about the environmental impact of the company's "clean diesel" fleet.

The SEC alleges in its complaint that from April 2014 to May 2015 VW 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 U.S. grossly exceeded legal vehicle-emissions limits, exposing the company to massive financial and reputational harm.

"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 at the SEC, in the statement. "As we allege, Volkswagen hid its decadelong emissions scheme while it was selling billions of dollars of its bonds to investors at inflated prices."

The SEC charges add a new dimension to the saga that began when U.S. authorities exposed Volkswagen's diesel fraud in 2015 and the company admitted to rigging nearly 11 million diesel vehicles world-wide to cheat emissions tests.

VW on Friday called the complaint "legally and factually flawed" and said it would contest the charges "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 company said in a statement.

Mr. Winterkorn, through his attorney, declined to comment.

The complaint alleges that VW, by concealing the emissions scheme, reaped hundreds of millions of dollars in benefits by issuing the securities at more-attractive rates for the company, the agency said. The SEC said it charged VW, Mr. Winterkorn and subsidiaries Volkswagen Group of America Finance LLC and VW Credit Inc. with violating the antifraud provisions of the federal securities laws.

Write to William Boston at william.boston@wsj.com

 

(END) Dow Jones Newswires

March 15, 2019 06:01 ET (10:01 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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