German police raid home of Audi chief as VW probe grows

FRANKFURT, Germany — Volkswagen’s reluctance to overhaul top management after a costly emissions scandal led to further turmoil at the carmaker Monday after German prosecutors said they had opened a fraud investigation against Rupert Stadler, the head of the highly profitable Audi division.

Stadler, whose home was raided by investigators Monday, is the first active member of Volkswagen’s management board to be identified as a suspect in the inquiry. The disclosure by Munich prosecutors that he is a target is likely to intensify criticism that the company has been slow to distance itself from executives whose subordinates devised software designed to dupe environmental authorities.

The scandal, which involved cheating on diesel emissions, has already cost the company tens of billions of dollars and led to the arrest or imprisonment of several key executives. But Volkswagen has only gradually replaced people who held high-ranking positions while the illegal software was being devised and deployed.

As a result, new revelations continue to erode its reputation more than 2½ years after the U.S. Environmental Protection Agency first accused the company of wrongdoing.

The focus on Stadler also threatens one of Volkswagen’s most profitable units. Audi luxury cars, which compete with BMWs and Mercedes, accounted for 14 percent of

● the vehicles that Volkswagen sold in the first three months of 2018 but 28 percent of the operating profit.

Stadler has denied wrongdoing and resisted calls by shareholders to resign despite evidence that the illegal software originated in his unit and that people who reported directly to him were involved. There was no indication from Audi or Volkswagen on Monday that he would resign or be forced out.

Volkswagen has admitted that the software used to conceal excess diesel emissions was first developed at Audi, which Stadler has run since 2007. Audi diesels were also among some 11 million vehicles equipped with the software, which was designed to ensure they spewed lower levels of emissions during laboratory testing than during normal driving conditions.

Investigators have raided Audi offices and employees’ homes several times in recent months, and they have said that former members of the management board were suspects, though until Monday they had excluded Stadler. He is suspected of fraud in connection with the sale of Audis in Europe that were equipped with illegal software, as well as false advertising, prosecutors said in a statement.

The prosecutors said Monday that they were also investigating another member of Audi’s top management. They did not identify the person, in line with German rules designed to shield people who are not considered public figures. However, two people with direct knowledge of the investigation confirmed a report in the newspaper that the second suspect was Bernd Martens, head of purchasing for Audi.

Audi said it was cooperating fully with investigators but declined to comment further. Volkswagen also declined to comment.

Martin Winterkorn resigned in September 2015 as chief executive of Volkswagen days after the scandal came to light. Last month, the U.S. Department of Justice indicted Winterkorn on fraud charges in connection with the emissions deception.

But Volkswagen kept many of Winterkorn’s close associates, including Stadler. The company insisted that the wrongdoing was the work of a small group of engineers and has been reluctant to clean house.

Hans Dieter Potsch, the Volkswagen chief financial officer throughout the time the software was in use, is now chairman of the company’s supervisory board. Prosecutors have said Potsch is under investigation for failing to fulfill his duty to inform shareholders of the risks Volkswagen was taking, but have not accused him of taking part in the diesel fraud.

Winterkorn’s replacement in 2015 was Matthias Muller, another longtime insider who worked under Stadler at Audi. Muller resigned under pressure in April in part because he was having trouble moving Volkswagen beyond the scandal.

The new chief executive, Herbert Diess, is a former BMW manager who joined Volkswagen only a few months before U.S. regulators discovered the cheating. By Volkswagen standards, Diess is an outsider, but it is probably too early to judge whether he will be able to shake the stigma of the scandal more effectively than his predecessor.