Around 80 institutional investors, including pension funds from the US and the UK, have joined a lawsuit seeking billions of euros in damages from Volkswagen (VW) in connection with the automaker’s emissions scandal.
The lawsuit, filed in January by the Frankfurt law firm Nieding + Barth, claims that VW took far too long to communicate to investors that it had cheated during emissions tests of its EA189 diesel engine. The company publicly admitted to the cheating on September 22, 2015.
If proven true, this would be a violation of German securities law (Wertpapierhandelsgesetz or simply WpHG). The WpHG obliges listed firms to communicate information relevant to the share price in a timely fashion. VW’s share price has lost more than one-third of its value since the cheating revelation.
According to Klaus Nieding, Managing Partner at Nieding + Barth, and Vice President of German shareholder association DSW, the plaintiffs in the case are seeking more than €2bn in damages from VW. To prepare the case, Nieding’s firm has partnered with Müller Seidel Vos, a Cologne-based law firm as well as Robbins Geller Rudman & Dowd, which specialises in US class actions.
While VW has filed a motion in court to suppress information about how many lawsuits had been filed against it for breach of the WpHG, Nieding said the move was irrelevant as that number was now public knowledge. The point is crucial, as ten complaints concerning the same issue must be filed in order for one of them to get ‘KapMu’ status – that is the German equivalent of the class action. Nieding + Barth and itslegal allies are hoping that their lawsuit gets that status (see last week’s story).
VW has issued a detailed statement about the events leading up to last September’s cheating admission. It denies that former Chief Executive Martin Winterkorn or other top managers knew about the rigging of diesel engines so that they had lower emissions of nitrogen oxide (NOx) during tests.
VW said: “A group of persons at levels below the group’s management board in the powertrain division decided to modify the software for the EA189 engine. With this modification, emissions values were generated in bench testing that differed substantially from those under real driving conditions.”
VW goes on to say that Winterkorn was made aware of possible emissions rigging as early as May 2014. According to the firm, a memo was sent to him regarding an independent finding that the EA189 had lower NOx emissions during tests than when driven. But: “Whether and to which extent took notice of this memo at the time is not documented,” VW said.
Finally, VW said that while Winterkorn and the rest of the management board definitely knew about the emissions rigging in early September 2015, they regarded it as a minor US regulatory issue. VW insisted that it expected a fine in “two-digit or lower three-digit million amount” instead of the €18bn maximum penalty that the US government ultimately announced.
Commenting on VW’s statement, Nieding said that it didn’t change the facts of the case. “I can’t speculate as to whether Winterkorn reads his mail or not, but the fact is he was told about possible emissions rigging.”