VOW3 Volkswagen AG

By William Boston 

BERLIN -- Volkswagen AG said it would seek compensation from former CEO Martin Winterkorn and the former CEO of its Audi luxury car unit, Rupert Stadler, for damages suffered in the wake of the diesel scandal that has cost the German car maker more than $35 billion in damages and fines.

The decision to seek damages from the former long-serving executives most closely identified with the scandal caps an internal investigation that began six years ago when U.S. authorities charged Volkswagen with conspiracy to commit fraud, making false statements on goods brought for sale in the U.S. and obstruction of justice. The U.S. probe uncovered a decadelong ploy by Volkswagen to rig millions of diesel-powered vehicles to cheat emissions tests and later attempt to cover up the cheat.

The diesel scandal, one of the largest frauds by a European company in recent history, resulted in the company pleading guilty in 2017 in the U.S. to settle criminal charges for around $4.3 billion. The company also agreed to pay hundreds of thousands of U.S. owners of Volkswagen and Audi vehicles billions of dollars in compensation.

When the fraud was revealed in September 2015, Volkswagen's shares tanked, causing large losses for investors and eventually leading to the resignation of Mr. Winterkorn.

The company admitted that the emissions cheating that was disclosed in the U.S. began in Germany. Over the course of a decade VW engineers installed illegal software on nearly 11 million vehicles to enable them to pass emissions tests even though they emitted levels of toxic tailpipe emissions that violated environmental laws.

Mr. Winterkorn became aware of the software cheat and the U.S. investigation in the summer of 2015 at the latest, VW's supervisory board said in a statement, adding that he had failed to act swiftly and comprehensively to clarify the facts and hadn't ensured that questions posed to the company by U.S. authorities were answered quickly, completely and honestly.

As a result, the board's investigation concluded that Mr. Winterkorn was in breach of his duties as chief executive.

Mr. Winterkorn has been indicted on charges of fraud in Germany. He has repeatedly stated that he bears no responsibility for the diesel scandal. Through his attorney, Mr. Winterkorn rejected the board's allegation and said he regretted their decision to seek damages against him.

Mr. Winterkorn joined Audi as a young engineer in 1981, becoming CEO of Audi in 2002 and five years later CEO of the entire VW group. He was known for micromanaging design and production details. He was known to order changes to the angle of windshields and would routinely measure the thickness of paint on new models.

The board is also seeking damages from Mr. Stadler, who succeeded Mr. Winterkorn as Audi chief executive in 2007 and remained in the job until he was arrested in connection with the diesel scandal in June 2018. He was released in October the same year and charged with fraud in 2019. He has been on trial in Munich with several other former Audi and Porsche executives since last autumn.

VW's board said Friday that it had concluded that Mr. Stadler had failed to investigate internally whether Audi engines used in VW, Audi and Porsche vehicles contained illegal software.

VW's board said its internal study found no other top executives in breach of their duties.

Mr. Stadler has said he is innocent of the charges he is being tried for. Neither Mr. Stadler nor his attorney could be reached for comment on the board's allegations or the company's decision to seek damages from him.

The investigation into potential executive liability began in the wake of the initial disclosures when VW commissioned the law firm Gleiss Lutz to determine whether the company had the right and responsibility to claim damages from any executives.

The final report was presented to the board this week, leading to Friday's decision.

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

(END) Dow Jones Newswires

March 26, 2021 12:05 ET (16:05 GMT)

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