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Six things to know about Volkswagen's latest court case

2018-09-07 09:24

The first major court case against Volkswagen over its cheating of emissions tests on 11 million diesel vehicles worldwide begins Monday. Here are six things to know about the trial.

What is the case about? 

The case in Brunswick, near VW's Wolfsburg headquarters in northern Germany, focuses on the plunge in the mammoth group's share price in September 2015.

After American authorities revealed its mass diesel cheating, the stock shed some 40% in two days.

Now investors are demanding compensation for their losses, saying Volkswagen should have warned them sooner about the risks.

Why should we care?

This is the first major trial related to "dieselgate" in Germany, where previously only a few individual customers have brought the carmaker to court and the results have not been made public.

In the US, VW settled claims with customers for some $14.7-billion, and two former managers were jailed.

While Monday's case deals with technical aspects of how and when the group communicated with financial markets, the court will have to lay out a timeline of the scandal and determine when executives knew about the cheating.

Such details are vital to ongoing criminal investigations in Germany.

What must the court decide?

Brunswick judges will rule on more than 200 questions submitted by the two sides in the case.

Among the most vital are whether VW should have let investors know about its cheating software, whether it deliberately covered up the information, and which board members knew what -- and when.

The answers will then be carried over to more than 3000 pending court cases from investors against VW and Porsche SE, the holding company that owns a controlling stake, to determine whether compensation should be paid out.

What are the risks for VW?

In total, the shareholders represented in those over 3000 cases are demanding €9.0-billion of compensation.

But if judges rule against VW, it will be up to the courts to decide in each case how much is owed.

So far, the group has paid out more than €27-billion in fines, legal costs and buy-backs over dieselgate in Europe and the US.

What do the investors say?

Lawyers for investment fund Deka, whose case is a "model" for the others with similar characteristics, argue VW should have informed investors at several points between 2008 - the time of the cheat software's first deployment - and September 22 2015, when it first admitted to the fraud.

They argue that managers knew about the so-called "defeat device" and that that information would likely have an impact on the group's share price.

What's Volkswagen's defence?

The world's biggest carmaker says that information available at the time did not make communicating with shareholders legally necessary.

They argue that the cheating was a scheme by a small group of engineers acting without their superiors' knowledge or authorisation.

Once alerted by the US authorities, executives did not realise how serious the scandal would become, they add, believing it could be resolved amicably.

Timeline of a scandal 

As Volkswagen faces the wrath of investors in the first mass "dieselgate" lawsuit on its home turf, here's a look at how the emissions cheating was uncovered and the fallout for the auto giant:

2014
US researchers at the University of West Virginia discover that certain VW diesel cars emit up to 40 times the permissible levels of harmful nitrogen oxide when tested on the road.

2015
September 18: The US Environmental Protection Agency accuses VW of duping diesel emissions tests using so-called "defeat devices".

September 22: Volkswagen admits installing software in 11 million diesel engines worldwide designed to reduce emissions during lab tests. VW shares plunge by 40 percent in two days.

September 23: Chief executive Martin Winterkorn steps down but insists he knew nothing of the scam.

2016
April 22: VW announces a net loss for 2015, its first in 20 years, after setting aside billions to cover the anticipated costs of the scandal.

June 28: VW agrees to pay $14.7 billion in buy-backs, compensation and penalties in a mammoth settlement with US authorities. The deal, which covers 2.0 litre diesel engines only, includes cash payouts for nearly 500,000 US drivers.

September 21: First VW investors file lawsuits in a German court seeking billions in damages. They accuse the automaker of failing to communicate about the crisis in a timely way.

December 8: The European Commission launches legal action against seven EU nations including Germany for failing to crack down on emissions cheating.

2017
January 11: VW pleads guilty to three US charges including fraud and agrees to pay $4.3 billion in civil and criminal fines.

As part of the plea deal, VW signs up to a "statement of facts" in which it admits that the cheating dates back to 2006, but it remains unclear how much top brass knew about the scam.

January 27: German prosecutors say they are investigating Winterkorn on suspicion of fraud, accusing him of knowing about the defeat devices earlier than admitted. He is already under investigation for suspected market manipulation over the scandal.

February 1: Car parts maker Bosch, which supplied elements of the software, agrees to pay nearly $330-million to US car owners and dealers but admits no wrongdoing.

VW says it will pay at least $1.2-billion to compensate some 80 000 US buyers of 3.0-litre engines as well as buying back or refitting their vehicles.

August 25: A Michigan court sentences VW engineer James Liang to 40 months in prison and a $200 000 fine, after pleading guilty to conspiracy to defraud the United States and violating the US Clean Air Act. He had asked for a more lenient sentence after cooperating with investigators.

December 6: VW executive Oliver Schmidt, who was arrested while on holiday in Florida, is sentenced to seven years in jail after pleading guilty to fraud and violating the US Clean Air Act.

2018
February 23: VW roars back to profit after record sales in 2017.

February 27: A German court paves the way for cities to ban the oldest diesels from their roads to combat air pollution.

April 12: VW brand chief Herbert Diess hastily replaces CEO Matthias Mueller after he too lands in prosecutors' sights.

April 20: A top manager at Porsche, a VW subsidiary, is arrested in Germany as part of "dieselgate" inquiries.
May 3: Winterkorn is indicted in the US, accused of trying to cover up the cheating.

June 13: VW agrees to pay a one-billion-euro fine in Germany, admitting its responsibility for the diesel crisis. The scandal has now cost the group over 27 billion euros.

June 18: Rupert Stadler, CEO of VW's Audi subsidiary, is arrested in Germany, accused of fraud and trying to suppress evidence.

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