Race on to file claims over VW emissions

PORSCHE Holding was dragged deeper into the Volkswagen emissions debacle as investors raced to file German lawsuits ahead of the one-year anniversary of the scandal.

A group of institutional investors filed a pair of lawsuits, seeking €2.8bn from VW and €2.2bn from Porsche, Klaus Nieding, a lawyer for the plaintiffs, said on Friday. Shareholders say both companies should have disclosed the problems sooner. Porsche, which is also publicly traded, owns the majority of VW shares.

Deutsche Asset Management, a unit of Deutsche Bank, will also sue to recover losses in the funds it manages, a person familiar with the issue said. The unit had to pursue the claims as it could otherwise be liable to clients, according to the person, who asked not to be identified. Deutsche Bank’s press office declined to comment.

The cases are among thousands flooding a court in Braunschweig, Germany, as investors sue over VW’s admission it rigged software on 11-million diesel vehicles to cheat on pollution tests. The German states of Hesse and BadenWürttemberg as well as BlackRock, the world’s largest money manager, were among the public and private entities joining the litigation.

“Stock investors have to accept there may be losses,” Hesse Finance Minister Thomas Schaefer said.

“What we must not accept are losses caused by a corporation that violates disclosure rules. That’s what VW did.”

Investors are lining up to sue in Germany, where VW shares lost more than a third of their value in the first two trading days after the September 18 disclosure of the scandal by US regulators. Investors are rushing to court this week because they fear they have to sue within a year of the company’s admission.

Hesse, BlackRock, the German state of Bavaria and thousands of other shareholders claim VW failed properly to disclose its actions in the probe. Employees installed software that detected when a car was on an emissions test stand and reduced pollution to allow the vehicle to pass inspections.

VW said in March CE Martin Winterkorn had received two memos informing him of discrepancies in US diesel emissions in 2014 and participated in a meeting that touched on the matter weeks before the scandal broke in 2015. Management did not treat the matter with particular attention, according to the company. This may have been because a memo supplied in November 2014 put the cost of the diesel issues at about €20m, not enough to grab the executives’ attention or fear a big backlash from investors.

Nieding said he was targeting Porsche because Winterkorn was also on the Porsche supervisory board when the scandal emerged. Other executives also served on boards of both companies, he said.

Porsche legally should be treated as knowing about the scandal because of the shared executives, and should have disclosed the matter, Nieding said.

Porsche spokesman Albrecht Bamler called the claims unfounded. Executives who serve on both boards are bound by secrecy rules and cannot disclose facts they learn from one company to the other, he said.

The company is facing about 80 cases filed by smaller investors in a Stuttgart court.

The first hearing is scheduled for September 30.

Hesse said it lost €3.9m when the scandal caused VW shares to drop from the EURO STOXX ESG Leaders 50, which the state’s investment managers were following. The exchange-traded fund provides access to companies that are global leaders in environmental, social and governance.

BlackRock is the secondlargest holder of VW’s preferred stock with a 3.35% stake after Qatar Holdings.

VW’s preference shares do not carry voting rights.

“It’s regrettable that the state of Hesse decided to sue,” VW spokesman Eric Felber said.

The company always complied with capital-market disclosure rules, he said.

EU justice commissioner Vera Jourova will meet VW’s Francisco Javier Garcia Sanz on September 21 as part of a campaign to persuade the company to offer car owners significant compensation. The company is only offering repairs to European customers whereas Americans got packages worth thousands of dollars.

We must not accept losses caused by a corporation violating rules