German Prosecutors Charge Former VW CEO over Diesel Crisis Testimony

Almost six years after the outbreak of the Volkswagen diesel crisis—in which the automaker was found to have used software to bypass emissions tests in the U.S. and other countries—prosecutors in Germany have charged the company’s former CEO with giving false testimony to the German Bundestag. Charges against Dr. Martin Winterkorn, the former chief executive who resigned days after the scandal broke in 2015, were announced on Wednesday of this week, and relate to his testimony in January 2017.

Specifically, prosecutors claim that Winterkorn knew about the software as early as May 2015, rather than September 2015 as he had claimed to a Bundestag committee.

The charges themselves concern a relatively narrow issue of the time span, and references to Winterkorn’s possible knowledge prior to September 2015 had been raised prior in an internal investigation that VW had commissioned to be performed by a law firm. In the spring of 2016, the automaker had reconstructed a timeline of events in the months leading up to September 2015, revealing a number of early warnings about emissions discrepancies.

Among other things, the automaker said at the time that Winterkorn received a memo about a U.S. study on May 23, 2014, that had noted discrepancies in U.S-market VW TDI models. However, Volkswagen said that it wasn’t sure if Winterkorn had actually read the memo at the time.

One memo was prepared for Winterkorn in May 2014, referencing the International Council on Clean Transportation study that had discovered that nitrogen-oxide outputs had differed for two VW models while they were in motion on the road, and when they were on a static stand. The memo about the ICCT study was included in his weekend mail, but VW admitted that it wasn’t sure if he had actually read that memo at the time.

“This memo was included in his extensive weekend mail. Whether and to which extent Mr. Winterkorn took notice of this memo at that time is not documented,” the automaker noted in 2016.

The automaker also indicated that Winterkorn had received a second memo later that year.

“On 14 November 2014, Mr. Winterkorn received another memo that reported, amongst other things, on several then-current product defect cases and referred to a cost framework of approx. EUR 20 million for the diesel issue in North America,” the automaker said in its timeline, which was published in 2016.

VW also admitted five years ago that the diesel matter had not been given sufficient attention at the time, in the months leading up to the publication of discovery of defeat devices, pointing out that it was one of many regulatory issues facing the automaker in various markets and that emissions discrepancies were treated as another regulatory issue that could require engine recalibration.

Of course, memos regarding emissions discrepancies that occur for an unknown reason and one’s actual knowledge of emissions-cheating software created by the automaker are two different things, so VW did not claim at the time that Winterkorn had known about the creation of emissions-cheating software by the automaker. After all, such discrepancies could have been the result of hardware deficiencies, oversights by engineers, or build-quality issues, as is common with recalls.

The current charges against Winterkorn, brought by Berlin prosecutors, claim that Winterkorn falsely testified before the German parliament that he had no knowledge of the defeat devices prior to September 2015, which is when the scandal broke—and raises questions about whether Winterkorn and other executives knew why the discrepancies were occurring in U.S.-market diesel-engine Volkswagens.

Several senior Volkswagen engineers had been investigated or charged by German and U.S. authorities for their roles in the matter, including Oliver Schmidt, who received a seven-year prison sentence and a $400,000 fine in late 2017. Schmidt had been the general manager of Volkswagen’s U.S. Environment and Engineering Office in Detroit, and was arrested after trying to return to Germany from a family vacation in Florida, after having been interviewed several times by federal agents.

The questions that remain about the diesel crisis now mostly concern the knowledge or direction of top-ranking executives at Volkswagen.

The day before Winterkorn was charged this week, Volkswagen announced that it had reached a settlement with him, in which he agreed to pay the automaker 11.2 million euros, or about $13.6 million. Volkswagen also reached a settlement with Rupert Stadler, the former member of the Group Board of Management and chairman of the Board of Management of Audi. Earlier this spring the Board of VW had asserted claims of damages against both former executives for claimed breaches of the duties of care under Germany stock corporation law.

“Based on the outcome of this investigation, the Supervisory Board has concluded that Prof. Winterkorn breached his duties of care as former Chairman of the Board of Management of Volkswagen AG by failing, in the period from 27 July 2015 on, to comprehensively and promptly clarify the circumstances behind the use of unlawful software functions in 2.0L TDI diesel engines sold in the North American market between 2009 and 2015,” the automaker said this week. “Prof. Winterkorn also failed to ensure that the questions asked by the U.S. authorities in this context were answered truthfully, completely and without delay.”

The prosecutors’ charges against Winterkorn, therefore, concern the same period of time, though it is not known if Winterkorn had made any similar admissions in the actual settlement agreement with VW. However, such details are rarely publicized.

Stadler’s settlement concerns a very different time frame—after September 21, 2016—so about a year after the scandal broke. The breaches of duty of care, interestingly enough, concern his failure to ensure, VW asserts, that 3.0-liter and 4.2-liter TDI engines used by VW, Audi, and Porsche vehicles “were investigated with regard to unlawful software functions.”

This allegation by the supervisory board is not too dissimilar in scope from other allegations leveled against Stadler; he was arrested in Germany in 2018 and spent months in detention, after prosecutors had raided his home as well as Audi offices, and later had been charged with fraud in connection to Audi’s role in the development of defeat devices. Stadler’s trial has not concluded yet, due to court proceedings being delayed due to the pandemic.

The amounts that VW had agreed to receive from Winterkorn and Stadler pale in the scope of the costs of the VW Group’s diesel crisis worldwide, which stands at some $39 billion by most estimates. Investigations into the matter are still ongoing, with French prosecutors charging VW earlier this spring, in addition to Renault in an unrelated but similar diesel emissions matter.

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