But this may actually be a stupid move.
There’s a law in Germany that requires corporations to force executives to personally help pay for any wrongdoings that occurred during their tenure if criminal charges are filed. The Volkswagen Group, which agreed to pay nearly $30 billion (25 billion euros) in fines associated with the Dieselgate scandal, can now legally turn to former CEO Martin Winterkorn to help foot the bill. As we recently reported, Winterkorn has been charged with four felonies in America, thus allowing VW to go after him for the money.
Bloomberg News, however, is reporting that may not actually be the best idea. Why? Because “any effort to take Winterkorn to account…could bolster investors suing VW for 9 billion euros for failing to inform the market about the diesel issue earlier.” Forcing Winterkorn to pay up could also potentially get other current executives involved, specifically newly appointed CEO Herbert Diess. On the one hand, VW would love nothing more than to pay what it has to and move on. And on the other, shouldn’t a former CEO just charged with violating the US Clean Air Act, conspiracy to defraud customers, and three counts of wire fraud, be allowed off the hook here?
“VW is in a predicament: if the facts allow them to seek damages from Winterkorn, then most likely the investors will also have a valid case," Adrian Mueller-Helle, a lawyer at Wegnerpartner in Berlin, told Bloomberg. "The supervisory board normally has to sue, but in a conflict like this, some people argue there's leeway. It's tricky.” Fortunately for VW, it has time on its side; claims such as these against a former executive don’t expire for five years. Nothing will likely be decided until VW learns exactly what US and German prosecutors have learned through their investigations.
To this day, Winterkorn claims he was unaware of the emissions rigging, while VW is also adamant its engineers didn’t inform him the cars were equipped with defeat devices. According to Winterkorn and VW, he assumed this was an issue limited only to the US. Same goes for Diess, who was a new member of the board at the time. And therein lies the problem. If Winterkorn is forced to help pay the fines, then Diess will find himself in the same boat, and that’s not the boat a newly appointed CEO wants to be in.