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.


Pakistan receives $2.2 bn loan from China to stabilize economy

Updated 1 min 6 sec ago
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Pakistan receives $2.2 bn loan from China to stabilize economy

  • Chinese loan boosts foreign exchange reserves to around $11 billion
  • Currency reserves remain under constant pressure due to increasing foreign debt obligations

KARACHI: Pakistan on Monday received a $2.2 billion loan from staunch ally China to stabilize high fiscal and current account deficits, raising the country’s foreign exchange reserves to around $11 billion.
The move comes as Pakistan, which has opened talks with the International Monetary Fund about a possible bailout, faces a struggle to avoid a balance of payments crisis that has left it with growing debts and dwindling foreign exchange reserves.
“Yes we have received $2.2 billion from the China today,” Abid Qamar, a spokesman for the State Bank of Pakistan (SBP) told Arab News.
In November last year, China promised to support Pakistan’s economy following a meeting in Beijing between Chinese Premier Li Keqiang and Pakistani Prime Minister Imran Khan but the exact amount of the loan package was not announced.
“The inflow of Chinese financial assistance will improve foreign exchange reserves and ensure balance of payment stability,” Dr. Khaqan Hassan Najeeb, a spokesperson for the finance ministry, said.
Central bank data for up until March 15, 2019 shows that with the injection of the Chinese loan, foreign exchange reserves will increase to around $11 billion and total liquid reserves to around $17.9 billion.
Pakistan has been searching for investment from friendly countries since the government of Prime Minister Imran Khan took office in August. Last year, both Saudi Arabia and the United Arab Emirates also offered Islamabad loan packages of $3 billion. Saudi Arabia offered an additional $3 billion for import of oil on differed payments.  
But despite the foreign inflows, currency reserves remain under constant pressure due to increasing foreign payment obligations. The rupee traded at 140.40 against the US dollar in the interbank market on Monday as compared to 140.36 on Friday.
“There was no impact of the Chinese inflows today on the exchange rate but it could be on Tuesday,” Zafar Paracha, General Secretary of Exchange Companies Association of Pakistan, told Arab News. “Uncertainty about IMF is one of the reasons. Despite foreign inflows, currency reserves are continuously falling.”
Pakistan’s net international reserves also continue to deteriorate on the back of high debt repayments. Over the next twelve months, Pakistan has to pay $14.6 billion in debt servicing including $12.8 billion as principal repayment and $1.8 billion as interest, according to Arif Habib Limited research.