VW Board Backs Chairman, CEO Facing Charges in Diesel Scandal

(Bloomberg) -- Volkswagen AG’s supervisory board backed Chief Executive Officer Herbert Diess and Chairman Hans Dieter Poetsch, a day after German prosecutors charged the top managers with market manipulation related to the diesel-emissions scandal.

In a special meeting Wednesday called to discuss the prosecutors’ decision, the board also rejected the charges, saying VW complied with disclosure rules, according to a statement.

“The successful cooperation with the supervisory board chairman and the management board chairman will be continued,” VW said. It cited an extensive four-year investigation that failed to uncover intentional misleading of investors about the scope of any potential financial fallout from a U.S. probe into its diesel cars.

The German auto giant, along with lawyers for Diess, Poetsch and former CEO Martin Winterkorn, stuck to their long-held view that the potential financial toll -- which has reached 30 billion euros ($33 billion) in fines and other expenses -- was a surprise.

The scandal came to light in September 2015, sending VW shares down and eventually leading to consumer lawsuits and criminal cases. The latest charge and possible trial of the top managers could drag on, coming at a time when VW is facing a shift to electric cars and slower sales in some key markets.

The Volkswagen market-manipulation probe was prompted by Germany’s financial regulator Bafin, which in mid-2016 asked prosecutors to investigate Winterkorn and Diess. Three months later, Poetsch was added as a suspect. Diess was chief of the VW brand at the time, having joined the company from BMW AG in July 2015, just weeks before U.S. authorities uncovered the use of illegal engine-control software to bypass emission tests for diesel cars.

On Tuesday, prosecutors in the German city of Braunschweig said that Winterkorn knew no later than May 2015 of the manipulation, and that Poetsch was in the know from June 29 of that year. Diess had complete knowledge of the matter from July 27, less than a month after he had joined the company. The scandal wasn’t brought to the public’s attention until Sept. 18, via a so-called “notice of violation” in the U.S.

The Braunschweig Regional Court now has to review the indictment and decide whether to try the executives on the charges. In a complex matter like this one, the review usually takes months and the lawyers for the accused will get the opportunity to comment on the indictment before the three judges rule. That means any trial could take place next year at the earliest.

Market-manipulation cases are rare in Germany and prosecutors haven’t been particularly lucky with them. Former Porsche Automobil Holding SE CEO Wendelin Wiedeking and ex-CFO Holger Haerter were acquitted in 2016 from this type of allegation.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, Iain Rogers

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