US SEC sues Volkswagen, Winterkorn, citing ‘Dieselgate’ fraud on investors

Volkswagen “reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company,” the SEC said. (File/AFP)
Updated 15 March 2019
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US SEC sues Volkswagen, Winterkorn, citing ‘Dieselgate’ fraud on investors

  • Volkswagen said the complaint “is legally and factually flawed, and Volkswagen will contest it vigorously”
  • SEC said “repeatedly lied to and misled United States investors, consumers, and regulators”

WASHINGTON: The US Securities and Exchange Commission sued Volkswagen AG and its former chief executive Martin Winterkorn over the German automaker’s diesel emissions scandal, accusing the company of perpetrating a “massive fraud” on US investors.
The SEC said in its civil complaint filed in San Francisco late on Thursday that from April 2014 to May 2015, Volkswagen issued more than $13 billion in bonds and asset-backed securities in US markets at a time when senior executives knew that more than 500,000 US diesel vehicles grossly exceeded legal vehicle emissions limits.
Volkswagen “reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company,” the SEC said, adding 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 suit seeks to bar Winterkorn from serving as an officer or director of a public US company and recover “ill-gotten gains” along with civil penalties and interest.
Winterkorn, who resigned days after the scandal became public in September 2015, was charged by US prosecutors in 2018 and accused of conspiring to cover up the German automaker’s diesel emissions cheating.
He remains in Germany.
Volkswagen said in a statement the SEC complaint “is legally and factually flawed, and Volkswagen will contest it 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 automaker added that the SEC “does not charge that any person involved in the bond issuance knew that Volkswagen diesel vehicles did not comply with US emissions rules when these securities were sold” but repeats claims about Winterkorn “who played no part in the sales.”
A lawyer for Winterkorn could not immediately be reached early on Friday.
Volkswagen has agreed to pay more than $25 billion in the United States in connection with the three-and-a-half-year old scandal, paying claims from owners, environmental regulators, states and dealers, and has offered to buy back about 500,000 polluting US vehicles. That figure included $4.3 billion in US criminal and civil fines.
But the SEC said VW “has never repaid the hundreds of millions of dollars in benefit it fraudulently obtained.”
VW admitted in September 2015 to secretly installing software in 500,000 US vehicles to cheat government exhaust emissions tests and pleaded guilty in 2017 to felony charges. In total, 13 people have been charged in the United States, including Winterkorn and four Audi managers.
The SEC action also names Volkswagen arm VW Credit and Volkswagen Group of America Finance LLC, the entity used to sell the securities.


Foreign investors hope India dials back policy shocks after Modi win

Updated 24 May 2019
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Foreign investors hope India dials back policy shocks after Modi win

  • Modi’s pro-business image and India’s youthful population have lured foreign investors
  • After Modi’s win, about a dozen officials of foreign companies in India and their advisers said they hoped he would ease his stance and dilute some of the policies

NEW DELHI: Foreign companies in India have welcomed Prime Minister Narendra Modi’s election victory for the political stability it brings, but now they need to see him soften a protectionist stance adopted in the past year.
Modi’s pro-business image and India’s youthful population have lured foreign investors, with US firms such as Amazon.com , Walmart and Mastercard committing billions of dollars in investments and ramping up hiring.
India is also the biggest market by users for firms such as Facebook Inc, and its subsidiary, WhatsApp.
But from around 2017, critics say, the Hindu nationalist leader took a harder, protectionist line on sectors such as e-commerce and technology, crafting some policies that appeared to aim at whipping up patriotic fervor ahead of elections.

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“I hope he’s now back to wooing businesses,” said Prasanto Roy, a technology policy analyst based in New Delhi, who advises global tech firms.
“Global firms remain deeply concerned about the lack of policy stability or predictability, this has sent a worrying message to global investors.”
India stuck to its policies despite protests and aggressive lobbying by the United States government, US-India trade bodies and companies themselves.
Small hurdles
Modi was set to hold talks on Friday to form a new cabinet after election panel data showed his Bharatiya Janata Party had won 302 of the 542 seats at stake and was leading in one more, up from the 282 it won in 2014.
After Modi’s win, about a dozen officials of foreign companies in India and their advisers told Reuters they hoped he would ease his stance and dilute some of the policies.
Other investors hope the government will avoid sudden policy changes on investment and regulation that catch them off guard and prove very costly, urging instead industry-wide consultation that permits time to prepare.
Protectionism concerns “are small hurdles you have to go through,” however, said Prem Watsa, the chairman of Canadian diversified investment firm Fairfax Financial, which has investments of $5 billion in India.
“There will be more business-friendly policies and more private enterprise coming into India,” he told Reuters in an interview.
Tech, healthcare and beyond
Among the firms looking for more friendly steps are global payments companies that had benefited since 2016 from Modi’s push for electronic payments instead of cash.
Last year, however, firms such as Mastercard and Visa were asked to store more of their data in India, to allow “unfettered supervisory access,” a change that prompted WhatsApp to delay plans for a payments service.
Modi’s government has also drafted a law to clamp similar stringent data norms on the entire sector.
But abrupt changes to rules on foreign investment in e-commerce stoked alarm at firms such as Amazon, which saw India operations disrupted briefly in February, and Walmart, just months after it invested $16 billion in India’s Flipkart.
Policy changes also hurt foreign players in the $5-billion medical device industry, such as Abbott Laboratories, Boston Scientific and Johnson & Johnson, following 2017 price caps on products such as heart stents and knee implants.
Modi’s government said the move aimed to help poor patients and curb profiteering, but the US government and lobby groups said it harmed innovation, profits and investment plans.
“If foreign companies see their future in this country on a long-term basis...they will have to look at the interests of the people,” Ashwani MaHajjan, an official of a nationalist group that pushed for some of the measures, told Reuters.
That view was echoed this week by two policymakers who said government policies will focus on strengthening India’s own companies, while providing foreign players with adequate opportunities for growth.
Such comments worry foreign executives who fear Modi is not about to change his protectionist stance in a hurry, with one offical of a US tech firm saying, “I’d rather be more worried than be optimistic.”