Death of the Diesel: Volkswagen Board Crisis as Three Chairman Indicted in Germany for Stock Market Manipulation

Prison?

The Brunswick (Germany) public prosecutor’s office announced today that it had brought an indictment against the former Chairman of the Board of Management of Volkswagen AG, Prof. Martin Winterkorn, as well as against the Chairman of the Supervisory Board, Hans Dieter Pötsch, and the Chairman of the Board of Management, Herbert Diess, for the charge of market manipulation. The cases will now be examined by an independent court that could impose jail time, which is virtually unheard of for this level of (alleged) white collar criminals.

As a result, the Supervisory Board of Volkswagen AG hastily convened a meeting, claiming that it was unaware that the indictments were coming since it was allegedly cooperating in the investigation by the public prosecutor. It will also meet again tomorrow to discuss what is company threatening development.

It issued a statement that is in essence its defense – barely credible in AutoInformed’s view. It says among other things:

 “In the run-up to this decision, Volkswagen has cooperated closely with the public prosecutor’s office. The Supervisory Board has also dealt in detail with the investigation of the public prosecutor’s office and has respect for the public prosecutor’s office’s work.

Nevertheless, based on its own extensive and independent investigations since autumn 2015, the Executive Committee still can, also from today’s perspective, not see that the capital market was deliberately not informed. In addition to the presumption of innocence in general, there are, among other things, also the following specific aspects that speak against the charge of market manipulation:

1.      The substantial decrease in the share price of the VW share after publication of the Notice of Violation on 18 September 2015 is due to the fact that the US authorities published their allegations completely unexpectedly during ongoing discussions with Volkswagen.

2.      The Board of Management of Volkswagen AG could not foresee this change in the approach of the US authorities.

3.      In this respect, the Board of Management could rely on the legal advice of the renowned US law firm Kirkland & Ellis. On the basis of Kirkland & Ellis’s advice, it was to be assumed until the publication of the Notice of Violation that, as was the customary practice until then, a mutually agreed solution would first be worked out with the US authorities and then presented to the public in a joint statement.