VW Sued by SEC for Misleading Bondholders on Diesel Cheating

(Bloomberg) -- Volkswagen AG was sued by the U.S. Securities and Exchange Commission over claims the carmaker failed to disclose to investors that its diesel vehicles didn’t comply with emission standards.

The German automaker sold billions of dollars of corporate bonds and asset-backed securities in the U.S. from 2010 to 2015 while concealing its emissions-cheating scheme, according to the complaint filed by the regulator late Thursday in San Francisco federal court.

“The investors did not know that VW was lying to consumers to fool them into buying its ‘clean diesel’ cars and lying to government authorities in order to sell cars in the U.S. that did not comply with U.S. emission standards,” the SEC alleged.

The SEC informed the company that it might bring an enforcement action related to an investigation that formally began in January 2017, VW said Tuesday in its annual report.

Allegations that VW wrongfully withheld information about the emission software used in its diesel cars have loomed over the company since the scandal first broke in 2015. A German court is in the process of hearing a group action covering suits brought by thousands of investors with claims totaling more than 9 billion euros ($10 billion). The Braunschweig court has scheduled the next hearing in the case for March 25.

German prosecutors also are carrying out a criminal investigation into whether current Chief Executive Officer Herbert Diess, Chairman Hans Dieter Poetsch, and then-CEO Martin Winterkorn informed investors too late about VW’s diesel breaches and their potential impact years ago. The prosecutors will decide this year whether to pursue allegations of market manipulation against the trio. VW also said Tuesday that an administrative probe was opened against the company as part of the case.

VW has repeatedly said that it informed markets properly at all times, and the three managers have denied the allegations.

The case is U.S. Securities and Exchange Commission v. Volkswagen AG, 3:19-cv-01391, U.S. District Court, Northern District of California (San Francisco).

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