VW Raided by German Prosecutors Over Worker Chief's Pay

(Bloomberg) -- Volkswagen AG’s headquarters were raided by German prosecutors over allegations that executives improperly inflated the pay of a labor leader, adding to the carmaker’s list of woes since the discovery of its use of software to cheat on pollution tests of diesel vehicles.

The latest search, just three weeks after a raid by European Union antitrust regulators, is part of a probe into remuneration of works council chief Bernd Osterloh, a Volkswagen spokesman said Tuesday by phone, declining to provide further details. 

Sascha Rueegg, a spokesman for local prosecutors, confirmed the raids on Wednesday. He declined to provide more details as the investigation now is also looking into tax-related issues for which tougher confidentially rules apply.

Volkswagen is battling with a plethora of probes and suits, most of which are linked to the carmaker’s emissions scandal. The investigation over Osterloh looks into whether former and current management board members approved an inappropriately high compensation for the labor leader, the prosecutors in Braunschweig, the legal administrative center for Volkswagen’s hometown of Wolfsburg, said in May.

Company and labor spokesmen reiterated on Wednesday that the payments were in line with the law and had been reviewed by an external labor-law expert, and that Osterloh wasn’t a target of the probe.

“Prosecutors also raided the office of Bernd Osterloh, that seems to be a regular in these kind of proceedings,” the VW works council said in an emailed statement. “The state of affairs hasn’t changed: The probe doesn’t target Osterloh.”

The offices of Chief Financial Officer Frank Witter and personnel director Karlheinz Blessing were searched along with Osterloh’s.

The probe comes at a delicate time as it might taint Osterloh’s campaign to be re-elected early next year. Labor representatives have unusual sway at VW and Osterloh has been one of the most influential figures at the company over the past decade.

Under German law, labor representatives may not be disadvantaged but are also not allowed to get preferential treatment because of their roles. This includes a ban on disproportionate payments to avoid any impression of undue influence on them. Salaries that go beyond what an employee would normally get thus are improper and can’t be deducted from a company’s tax bill as expenses.

Osterloh’s base salary is about 200,000 euros ($237,000) annually, while his highest total pay for a single year, including bonuses, was about 750,000 euros, a representative of the executive said in May. Last year, his total payment was about 500,000 euros, the representative said.

To contact the reporters on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net, Karin Matussek in Berlin at kmatussek@bloomberg.net.

To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Peter Chapman, Tom Lavell

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