Porsche Faces New Legal Front in Stuttgart Case Over Diesel

(Bloomberg) -- Porsche Automobil Holding SE, the controlling shareholder of Volkswagen AG, faces a new legal front in investor cases over the diesel-emissions scandal after a Stuttgart judge indicated the company may be liable for misleading investors as far back as 2010.

Porsche’s 2009-10 report was probably wrong because it cited a VW document claiming its cars already complied with the strictest European emission rules for diesel engines, Judge Fabian Richter Reuschle wrote in a May ruling obtained by Bloomberg News. The judge is seeking to summon about 30 witnesses in an investor suit to find out what former VW Chief Executive Officer Martin Winterkorn knew about the scam.

The ruling extends the troubles for Porsche over the disclosure of the diesel cheating to capital markets. While there’s already a mass suit pending in a Stuttgart appeals court over claims totaling 865 million euros ($1 billion), Richter Reuschle has kept parts of some cases and continues to hear them individually. The ruling indicates investors may still be able to sue for trades as far back as November 2010.

“The court has to clarify whether there are enough facts showing a reprehensible motivation by” Porsche, the judge wrote in the ruling that hasn’t yet been made public, adding he needs to examine whether VW’s “action needs to be qualified as ruthless.”

The cases are baseless, Porsche spokesman Frank Gaube said by email, adding that the court didn’t rule on the merits of the claims. VW spokesman Nicolai Laude declined to comment on Richter Reuschle’s ruling.

Witness Privileges

While the ruling is a setback for Porsche, any suit before Richter Reuschle hinges on an issue pending with the appeals court in the mass case. The question is whether what executives learned about the scam in their role at VW can also be attributed to Porsche because the same people served at boards of both companies. Unless the appeals court says it’s possible, investors won’t be successful.

Likewise, the prospects depend on what VW’s then-CEO knew at the time. Most of the witnesses listed in the ruling are either being investigated themselves, such as Winterkorn, or they work at companies being probed, like Audi chief Rupert Stadler and Robert Bosch GmbH head Volkmar Denner. They can claim privileges not to testify and most certainly will do so, making it unlikely to find the evidence the court is looking for.

Richter Reuschle has issued several rulings unfavorable for Porsche and for Volkswagen, which is also being sued in Stuttgart. In turn, VW earlier this year filed a motion to remove him for bias, but the bid was rejected this week. VW filed most of its objections against the judge too late and others weren’t enough to question his fairness, the court said.

The judge’s previous actions raised “considerable doubts” about whether he can handle the cases objectively and without bias, VW’s Laude said Thursday, adding that VW may appeal the ruling rejecting the bid to have him removed.

The Porsche case is: LG Stuttgart, 22 O 348/16.

©2018 Bloomberg L.P.