Judge Slams VW Defense in Diesel Cheating Lawsuits

The German judge handling investor complaints about Volkswagen AG’s diesel cheating scandal was bluntly skeptical today about several key elements of the company’s defense, Bloomberg News reports.

The court in Brunswick is handling some 4,000 complaints that VW should have alerted investors before the cheating was made public by U.S. regulators in September 2015. The lawsuits ask for €9 billion ($10.4 billion) in compensation.

VW asserts that its top management didn’t reveal the cheating earlier because they anticipated a small regulatory fine that would not affect the company’s share price. But Judge Christian Jaede says a letter in August 2015 from one of VW’s law firms, Kirkland & Ellis, indicates otherwise.

“By no means could you infer from that memo that VW could expect leniency,” Jaede declares. He notes that VW had by then already actively concealed the cheating from U.S. regulators for more than a year.

Jaede is equally unimpressed by VW’s claim that it kept the cheating secret for a time to avoid jeopardizing its discussions with U.S. regulators. He says such a defense is convincing only if a company’s top management quickly and fully cooperates with authorities after learning of the cheating. Jaede tells VW it must prove its leadership was unaware of the crisis until September 2015.

Jaede also appeared to favor a plaintiffs’ claim that then-CEO Martin Winterkorn may have known about the cheating as early as 2008. He cites a speech Winterkorn gave in April of that year about the prospects of selling diesels in the U.S. The judge also points to comments Winterkorn made to a German environmental group in 2007 regarding their concerns about diesel emissions. Jaede says it would be reasonable to believe that both occasions would have caused Winterkorn to review VW’s diesel strategy. 

Finally, Jaede tells VW it must be more specific about a regularly scheduled “damage table” meeting in July 2015 to discuss technological problems faced by the carmaker. That meeting was attended by Winterkorn and Herbert Diess, now VW’s CEO. The judge asks the carmaker to provide details about who said what at the meeting.

Jaede tells both sides that the statute of limitations is likely to make claims about VW’s actions before July 2012 inadmissible.