November 6, 2016 / 10:28 AM / 2 years ago

Volkswagen emissions scandal deepens as prosecutors probe chairman

FRANKFURT (Reuters) - German prosecutors have widened an inquiry into suspected market manipulation by managers at Volkswagen (VOWG_p.DE) to include the carmaker’s supervisory board Chairman Hans Dieter Poetsch, VW said on Sunday.

Chairman of Volkswagen Hans Dieter Poetsch addresses a news conference after being appointed by Volkswagen's Supervisory board at the company's headquarters in Wolfsburg, Germany October 7, 2015. REUTERS/Axel Schmidt

The investigation, which relates to Poetsch’s time as finance chief, is the latest fallout from VW’s admission last year that it cheated on diesel emissions tests.

VW has acknowledged it installed software that deactivated pollution controls on more than 11 million diesel vehicles sold worldwide, damaging its global business and prompting the departure of Chief Executive Martin Winterkorn.

Adding to its troubles, a German newspaper reported on Sunday that a U.S. regulator found another cheat software device in vehicles made by its luxury division Audi which is unrelated to the device that triggered last year’s scandal at VW. Audi has declined to comment on the report.

The prosecutor’s office in Braunschweig first announced the market manipulation probe in June, targeting former CEO Winterkorn and VW brand chief Herbert Diess for suspected market manipulation related to the emissions scandal.

The prosecutor’s office said at the time that its inquiry centered on evidence that VW’s duty to disclose possible financial damage from the emissions test cheating may have arisen before Sept. 22, 2015, when it publicly admitted wrongdoing.

Winterkorn had already left VW at the time, while Diess is still head of its core brand.

“Based on a thorough examination by internal and external legal experts, the company reaffirms its belief that VW’s management fulfilled its duties to inform the capital market,” VW said on Sunday.

VW said the company and Poetsch, who was finance chief of Volkswagen from 2003 until he became chairman in October 2015, would fully support the prosecutor’s office in its investigation. The prosecutor’s office in Braunschweig was not immediately available for comment.

The Porsche and Piech families that control Volkswagen through their holding company Porsche SE (PSHG_p.DE), of which Poetsch is CEO, said on Sunday they backed the manager and shared VW’s view that he had complied with capital market rules.

The German state of Lower Saxony, VW’s second biggest shareholder with 20 percent of voting rights, said it was up to the prosecution and the courts to assess what had happened, adding Poetsch should be assumed to be innocent pending the completion of the investigation.


Sunday’s Bild am Sonntag report said the California Air Resources Board (CARB) had made a new discovery of cheating software in an automatic transmission Audi in summer 2016. CARB has declined to comment on the report.

Audi, the main contributor to earnings at parent VW, had already admitted last year to using illicit emissions-control devices in about 85,000 3.0 liter six-cylinder diesel engines and has so far this year set aside 752 million euros ($838 million) to cover related costs.

Bild am Sonntag, which cited no sources, said the software in CARB’s new discovery lowered carbon dioxide emissions by detecting whether a car’s steering wheel was turned as it would be if it was driving on a road.

If the steering wheel was not turned, as if it was being tested in a laboratory, the software turned on a gear-shifting program which produced less carbon dioxide, allowing the car to meet the emissions criteria.

If the wheel turned by more than 15 degrees, as if it was being driven, it turned the software off. The newspaper did not say if other performance criteria improved when this was switched off.

Audi stopped using the software in May 2016, just before CARB discovered the manipulation in an older model, the paper said. It said the affected transmissions were used in several hundred thousand vehicles, including Audi’s A6, A8 and Q5 models, adding that the carmaker had suspended several engineers in connection with the matter.

Any revelation of further cheating software would be a major setback after VW just reached a near $15 billion settlement with U.S. regulators and car owners, crossing one of the biggest hurdles in the clean-up of the scandal.

Reporting by Maria Sheahan; Additional reporting by Andreas Cremer, Jan Schwartz and Joe White; editing by Anna Willard/Ruth Pitchford

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