The Volkswagen AG logo is reflected in a floor panel during the IAA commercial vehicle trade fair in Hannover, German (Photographer: Krisztian Bocsi/Bloomberg)  

VW CEO Is Said to Receive Rare Safe-Passage Deal From U.S.

(Bloomberg) -- Not long after U.S. authorities filed sealed charges against Volkswagen AG’s old chief executive officer, they granted the new CEO a rare safe-passage deal.

The Justice Department agreement allows Herbert Diess, promoted last month to lead the German automaker, to travel the world freely without fear of being arrested in connection with the U.S.’s diesel-rigging investigation, according to two people familiar with the matter.

VW CEO Is Said to Receive Rare Safe-Passage Deal From U.S.

Diess also received a spoken assurance that he would be given advance notice should prosecutors seek to charge him in its emissions cheating probe, said the people, who asked not to be identified because the deal is confidential. Diess, who joined the automaker a couple months before the scandal became public in September 2015, isn’t accused of wrongdoing.

The agreement essentially makes it possible for Diess to effectively run the sprawling 12-brand behemoth, which has 120 factories spread across the world. As CEO, one of his primary tasks will be hopping around the globe to represent the automaker at major events such as car shows, plant openings and new model releases. The deal was approved after the former CEO, Martin Winterkorn, was indicted under seal in March. The charges against Winterkorn, who would face arrest if he travels to the U.S., were made public on May 3.

The Justice Department agreement suggests that Diess has some concern about potential scrutiny by U.S. authorities, or at least wanted extra insurance against being detained during his frequent travels leading a global company. Volkswagen pushed back last week against a U.S. House of Representatives request for Diess to testify about the company’s efforts to address diesel-cheating, saying such a hearing is “not necessary.”

Former prosecutors and criminal defense lawyers described the deal as unusual. They said it could imply that the U.S. believes it won’t charge Diess, or that he may be providing useful information in the ongoing investigation.

Volkswagen and the U.S. Department of Justice declined to comment when asked about the special arrangement for Diess.

Diess has spent more than two decades in the German auto business, including at Robert Bosch GmbH and BMW AG. As a fresh recruit at VW, Diess participated in a routine “damage table” meeting on July 27, 2015, in Wolfsburg, where emissions irregularities in the U.S. were explained to senior managers, according to a 2016 company statement.

Key Moment

That meeting was a key moment in the conspiracy -- one where Winterkorn “approved the continued concealment of the cheating software from U.S. regulators,” U.S. prosecutors said in the unsealed indictment against the former CEO. Winterkorn’s defense team is reviewing the charges and will decide after that on the next steps, Felix Doerr, the former CEO’s German defense attorney, said in an email.

Because Diess attended that meeting, he would know what was said by Winterkorn and others when they were together in the room. Diess is already under investigation in Germany -- along with Winterkorn -- for possible market manipulation for not going public sooner about the scandal.

Winterkorn Case

It’s unclear what remarks, if any, Diess made at the gathering in question. Diess didn’t help with the case against Winterkorn, according to the people familiar with the matter.

Prosecutors routinely use safe-passage letters with witnesses and subjects of investigations that allow travel for interviews or testimony. Lawyers for possible targets are sometimes allowed an opportunity to argue against prosecution ahead of any decision to bring charges. Prosecutors also sometimes give advance notice to those about to be charged if they’re in the U.S. and not considered a flight risk, so they can turn themselves in rather than face public arrest.

But a blanket safe-passage agreement is uncommon, former prosecutors said. It’s also rare to offer to give a heads-up about impending legal action to someone who may be outside the country and couldn’t be extradited easily, these people said.

One explanation for such an arrangement is that the Justice Department isn’t finished investigating but has already determined that Diess is unlikely to be charged, said Michael Koenig, a formal federal prosecutor now at Hinckley Allen & Snyder LLP.

‘Unique Situation’

“This is certainly a unique situation, and there are likely facts that the general public is not aware of that would allow for such an arrangement,” Koenig said.

Or, Diess may be providing useful information for the wider investigation, said Andrew Friedman, a white-collar defense lawyer at Shulman Rogers Gandal Pordy & Ecker PA. “I would anticipate there is some level of cooperation and some level of value this individual has,” Friedman said.

Among the eight individuals charged in the case, two have been brought to court. One executive, Oliver Schmidt, was arrested in Florida while vacationing there last year. Schmidt -- one of two employees who made presentations to Winterkorn, Diess and others at the July 2015 meeting -- didn’t initially cooperate with investigators. He later pleaded guilty and was sentenced in December to seven years in prison.

As for Winterkorn, Germany’s Justice Ministry said on May 4 that the former CEO wouldn’t be sent to the U.S. because the country refuses to extradite its citizens to countries outside the European Union. That means Winterkorn can’t be arrested unless he leaves his home country.

©2018 Bloomberg L.P.