Germany’s financial regulator has called on prosecutors to investigate the entire former management board of Volkswagen on suspicion of possible market manipulation.
The move comes with VW facing accusations from investors that it took too long to disclose to the markets that diesel vehicles had been equipped to cheat in emissions tests.
VW revealed last September it had used software-based “defeat devices” in up to 11m of its diesel vehicles, which served to understate emissions of hazardous nitrogen oxides in official laboratory tests.
But prosecutors in the northern German city of Braunschweig, near VW’s Wolfsburg headquarters, said on Monday there was evidence to suggest VW could have disclosed the potential damage arising from the emissions cheating earlier.
On that basis, the prosecutors said they had launched an investigation into Martin Winterkorn, VW’s former boss, and an unidentified second executive, into whether they had effectively manipulated markets — by delaying the release of information about the deception.
On Tuesday it emerged that BaFin, Germany’s financial watchdog, had called on the Braunschweig prosecutors to investigate the entire former management board — not just the two executives.
A person with knowledge of the matter said BaFin believed that it should be investigated whether the whole board should be held collectively responsible for how the cheating was communicated to markets. BaFin and VW declined to comment.
The news could prove embarrassing for VW chairman Hans Dieter Pötsch and its chief executive Matthias Mueller, who were both members of the management board when the diesel emissions scandal broke on September 18.
The affair triggered the biggest loss in VW’s 79-year history and its shares have fallen more than 20 per cent.
News of BaFin’s intervention comes as VW prepares for its annual meeting on Wednesday, when investors are expected to vent their anger over the emissions scandal and demand reform.
Several proxy advisers have recommended shareholders oppose a vote of confidence in the company’s supervisory and management boards.
Also this week law firm Quinn Emanuel said it had filed a lawsuit against VW on behalf of the California State Teachers’ Retirement System and other institutional investors over losses resulting from the drop in VW’s share price after the emissions scandal was disclosed.
“Companies must be held accountable when they engage in such widespread deliberate deceit which destroys shareholder value, damages their reputation and harms the public,” said Brian Bartow, general counsel for the Californian pension fund.
He added the action did not only seek to recover economic losses, but “ultimately, to implement much needed corporate governance reforms” at Volkswagen.
Other investors have questioned whether VW’s supervisory board has sufficient independence and authority to hold management to account. A majority of VW’s voting shares are controlled by the Porsche and Piëch families.