Investor pressure continues to pile up on VW as Allianz Global Investors considers legal action

Leading asset manager cites fiduciary duty to clients

German asset management giant Allianz Global Investors (AGI) has emerged as the latest investor to consider litigating against Volkswagen (VW) over the revelation last September that it cheated on emissions tests of its diesel engines.

It was a transgression dubbed “heinous” by the CEO of US pension giant CalSTRS, Jack Ehnes, in a sign of clear investor anger of the issue. That annoyance is now being translated into legal action.

AGI said that as VW may have violated German securities law by waiting too long to disclose the cheating, its fiduciary duty to its clients obliged it to consider suing the automaker.

Responsible Investor understands that AGI will decide later this month whether to join one of the many investor-backed suits already filed. Through its investment funds, AGI owns 0.06% of VW’s share capital – including preferred shares and those with voting rights.

AGI’s move comes one week after VW sought to explain why it did not inform its investors before September 22, 2015 about the cheating. In a statement, VW said its management board, including former Chief Executive Martin Winterkorn, was not fully aware until early September 2015 that the EA189 diesel engine was rigged to have lower emissions during tests by US regulators.

VW also said that the management board regarded the rigging as a minor US regulatory issue that could be settled with, at most, a penalty in the “three-digit millions.” No way did VW expect that the US Environmental Protection Agency (EPA) would pursue a maximum penalty of up to €18bn, it said.But lawyers representing the VW investors counter that German securities law obliged the automaker to tell the market about the engine rigging as soon it was known internally instead of waiting for its management board to hear of it. VW admits that Winterkorn was told of the rigging in a memo dated May 23 2014.

There are at least three lawsuits backed by big investors in VW, including one filed by German law firm TILP; another by TILP peer Nieding + Barth; and one coming from law firm Quinn Emanuel and foreign litigation finance group Bentham Europe. All seek billions of euros in damages from VW over the fall in its stock price caused by the emissions rigging scandal.

In other corporate governance news out of Germany, Union Investment and Deutsche Asset Management (DeAM), which like AGI are major investors in Dax-30 firms like VW, have come out in support for age and tenure limits for board directors at those firms.

Speaking at a gathering of the International Corporate Governance Network (ICGN) in Frankfurt yesterday (March 8), Union Proxy Services Head Ingo Speich said he believed Dax board directors should be no more than 75 years age at the time of election to ensure that the board stayed up-to-speed on corporate challenges.

Nicolas Huber, Speich’s counterpart at DeAM, said that while his firm did not place any age limits on Dax directors, it did favour keeping their tenures to a maximum of ten years. This, he said, was one way of keeping a Dax board current. Union supports keeping the tenure to a maximum of 15 years, though it reserves the right to decide this on a case-by-case basis, Speich added.