In a writ, filed in the Northern California district court, the commission alleges that over the 13 months to May 2015, Volkswagen issued more than $13bn (£9.8bn) worth of bonds and asset-backed securities in the US markets even though senior management was well aware that more than 500,000 vehicles grossly exceeded legal vehicle emission limits. As a result, the company was exposed to massive financial and reputational damage.
The complaint also accuses that Volkswagen made “false and misleading statements” to investors and underwriters about its vehicle quality, environmental compliance and its financial status. “By concealing the emissions scheme, Volkswagen reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company,” it adds.
Former CEO Martin Winterkorn, Volkswagen and the two subsidiaries, Volkswagen Group of America Finance LLC and VW Credit Inc, are charged with violating the antifraud provisions of the federal securities laws.
The SEC is demanding retrieval of all the “ill-gotten gains” the company made plus interest, civil penalties and permanent injunctions.
“Issuers availing themselves of American capital markets must provide investors with accurate and complete information,” said Stephanie Avakian, co-director of the SEC’s enforcement division.
“As we allege, Volkswagen hid its decade-long emissions scheme while it was selling billions of dollars of its bonds to investors at inflated prices.”
The emissions scandal, which broke in September 2015 when the company confessed to using illegal software to cheat US emissions tests, has already cost the company billions of dollars in compensation on both sides of the Atlantic. In October 2016, Volkswagen reached a $14.7bn settlement with some 475,000 US car drivers and in June last year, it paid out €1bn (£853m) in Germany to public prosecutors to bring to a close criminal charges against it.
In a statement, Volkswagen denied the SEC’s charges, which it said were legally and factually flawed, and said it would defend itself vigorously. "The SEC has brought an unprecedented complaint over securities sold only to sophisticated investors who were not harmed and received all payments of interest and principal in full and on time," it added.
"The SEC does not charge that any person involved in the bond issuance knew that Volkswagen diesel vehicles did not comply with US emissions rules when these securities were sold, but simply repeats unproven claims about Volkswagen AG’s former CEO, who played no part in the sales. Regrettably, more than two years after Volkswagen entered into landmark, multibillion-dollar settlements in the US with the Department of Justice, almost every state and nearly 600,000 consumers, the SEC is now piling on to try to extract more from the company.”