More Legal Trouble for Volkswagen, Former CEO

While three and a half years have passed since the Volkswagen diesel scandal broke, its reverberations are still being felt. For the automaker turned green soothsayer, this usually comes with financial hardship attached, plus the requisite regurgitation of a past VW would like to see forgotten.

The latest salvo launched at VW over its emissions-rigged cars comes from the U.S. Securities and Exchange Commission, which is suing the company — as well as its former CEO, Martin Winterkorn — for the “massive fraud” it says VW perpetrated on investors.

The civil complaint, filed Thursday, argues that VW and its leadership should have informed investors that the company was about to take a massive hit. While the exact story of “who knew what and when” isn’t quite settled, it’s clear the automaker knew a reckoning was in the works. Just how big of one is up for debate.

Ultimately, the fines, penalties, and recalls cost VW more than $30 billion and sparked its transformation into an automaker that, just this week, promised 22 million electric vehicles on the road within a decade.

But the SEC isn’t concerned with VW’s EV ambitions or its new persona. It wants penance for the $13 billion in bonds and asset-backed securities the company issued in the U.S. from April 2014 to May 2015.

Volkswagen “reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company,” the SEC suit said, as reported by Reuters. The regulator claims VW “repeatedly lied to and misled United States investors, consumers, and regulators as part of an illegal scheme to sell its purportedly ‘clean diesel’ cars and billions of dollars of corporate bonds and other securities in the United States.”

The SEC singles out Winterkorn, too. The former CEO, who hit the road days after the scandal broke in September 2015, was indicted by U.S. prosecutors last year for his alleged role in violating the Clean Air Act with a fleet of polluting vehicles outfitted with “defeat devices” in order to fool Environmental Protection Agency testers.

The suit seeks to collect the German national’s “ill-gotten gains” while also imposing penalties and preventing him from ever serving as an officer or director of a U.S. company.

Of course, Volkswagen’s having none of this. It fired back at the SEC, saying the regulator’s suit was based on “legally and factually flawed” information.

“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 stated, adding that the people issuing the bonds had no way of knowing the company’s vehicles were rolling bundles of illegality.

In addition to an expensive recall and buyback program, VW was forced to cough up $4.3 billion in fines in the United States.

a version of this article first appeared on TTAC