Business & Tech

VW chief is suspected of market manipulation

German prosecutors said on Wednesday that Volkswagen CEO Matthias Mueller was under investigation over whether he had failed to warn shareholders soon enough about the scandal.

RONNY HARTMANN/AFP/Getty Images/file 2016

German prosecutors said on Wednesday that Volkswagen CEO Matthias Mueller was under investigation over whether he had failed to warn shareholders soon enough about the scandal.

FRANKFURT — Even after Volkswagen pleaded guilty to a nine-year conspiracy to dupe regulators and consumers, the carmaker has continued to insist that top executives played no role in the emissions fraud.

But internal company e-mails and memos, which were reviewed by The New York Times, indicate that engineers wanted approval from top managers to deploy the illegal software almost from the beginning, with regular status reports noting that high-level signoff was necessary.

Advertisement

The emissions issue was the main agenda for a 2007 meeting attended by Matthias Mueller, the current chief executive, who was then Volkswagen’s head of product planning, as well as Martin Winterkorn, the chief executive at the time. A presentation for the meeting detailed plans to conceal excess emissions of diesel cars in the United States, including the so-called defeat device at the center of the crime.

Volkswagen said there was no evidence that either executive saw the presentation. An internal summary of the meeting prepared shortly after it took place made no mention of the illegal software. Mueller and Winterkorn have denied wrongdoing.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

“The Volkswagen Group is aware of the documents,” the company said in a statement, “and they do not support the inference that Matthias Mueller knew about efforts to develop and use the defeat device.”

But the documents, along with the continuing criminal investigations in the United States and Germany, signal that the scandal is creeping closer to Volkswagen’s boardroom.

German prosecutors said on Wednesday that Mueller was under investigation over whether he had failed to warn shareholders soon enough about the scandal. German authorities have searched the offices of Mueller and other senior executives. A federal judge in the United States called last month for top managers to be held responsible.

Advertisement

“This is a case of deliberate, massive fraud perpetrated by Volkswagen management,” Judge Sean F. Cox of US District Court in Detroit said at Volkswagen’s sentencing in April.

“We don’t know how far up this goes,” he added. “We hope the Justice Department will find and prosecute those responsible.”

The corporate culture at Volkswagen has been defined by its rigid, top-down approach. Winterkorn and other top managers scrutinized even small changes to a motor’s design, raising doubts about how they could have been ignorant of technology that was installed in so many vehicles.

Shortly after the meeting, engineers moved forward with the deception, putting the defeat device in models that went on sale the next year. In the ensuing years, the carmaker installed the illegal software in 600,000 Volkswagen, Audi, and Porsche diesel cars sold in the United States, out of 11 million fitted with the device worldwide.

Wrongdoing on that scale “doesn’t happen without a set of incentives — fear, a feeling that even if this is not directly ordered, it is what was expected,” said David Bach, a senior associate dean at the Yale School of Management.

Six employees have been charged in the United States over the deception and another has pleaded guilty. No former or present members of the management board have been charged with wrongdoing. The US investigation is continuing, and FBI agents are interviewing witnesses, according to lawyers in the case.

Stuttgart prosecutors said Wednesday that they had found enough evidence to warrant a formal investigation of Mueller on accusations that he was aware of the looming emissions scandal but failed to warn shareholders. Shares of Volkswagen and Porsche Automobil Holding, which controls a majority of Volkswagen shares, plunged after the deception came to light and have only partially recovered.

Mueller is identified as a suspect in connection with his membership on the management board of Porsche Automobil Holding. In a statement, Porsche denied wrongdoing by any of its board members.

Whether top-echelon managers knew of the emissions cheating, and if so, when, has major implications for Volkswagen’s finances. Shareholders in Europe and the United States have sued, claiming that members of the management board neglected their duty to warn of risks that could affect the share prices.

By some estimates, the lawsuit could cost Volkswagen $10 billion if shareholders prove that top managers knew of the illegal behavior sooner than they have admitted. Volkswagen has already agreed to pay criminal and civil penalties of $4.3 billion under the terms of a plea agreement with US authorities.

Loading comments...
Real journalists. Real journalism. Subscribe to The Boston Globe today.
We hope you've enjoyed your free articles.
Continue reading by subscribing to Globe.com for just 99¢.
 Already a member? Log in Home
Subscriber Log In

We hope you've enjoyed your 5 free articles'

Stay informed with unlimited access to Boston’s trusted news source.

  • High-quality journalism from the region’s largest newsroom
  • Convenient access across all of your devices
  • Today’s Headlines daily newsletter
  • Subscriber-only access to exclusive offers, events, contests, eBooks, and more
  • Less than 25¢ a week
Marketing image of BostonGlobe.com
Marketing image of BostonGlobe.com