Martin Winterkorn
The Supervisory Board is convinced that from July 27, 2015, Winterkorn failed to clarify the background to the use of impermissible software functions in diesel engines.
(Photo: Reuters)
Düsseldorf The Volkswagen Group and six former board members are on the verge of reaching an agreement in the dispute over compensation from the diesel scandal. Appropriate agreements are to be signed this week. The Handelsblatt learned this from circles familiar with the events.
At the end of the day, the managers are likely to be personally liable with a total of two-digit millions, with the lion’s share said to come from ex-CEO Martin Winterkorn. According to Handelsblatt information, he has agreed to pay a good ten million euros. Two other board members are expected to pay between six and seven million euros, the remaining between one and three million euros each.
A comparison of coverage should also be made with the Group’s management liability insurer. The insurers around the Zurich Group could pay between 200 and 300 million euros. First, the online magazine “Business Insider” reported on upcoming agreements.
Neither the group nor the managers and insurers wanted to comment on the negotiations.
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Under the aegis of Winterkorn and Co., the VW group manipulated the exhaust gas values of more than eleven million vehicles. When the scandal – even if not yet to this extent – became known in September 2015, the VW common stock collapsed within a few days by around 40 percent, more than 30 billion euros were destroyed. The company has had to raise more than 30 billion euros for fines in the USA, compensation for damages to customers and dealing with the scandal.
At the end of March, the VW supervisory board decided to claim damages from Winterkorn, the former Audi boss Rupert Stadler and four other ex-board members for violating stock corporation law. The group based its claims for recourse on an expert opinion from the law firm Gleiss Lutz. The law firm came to the conclusion that the then CEO Winterkorn had failed to clarify the background to the use of impermissible software functions in diesel engines immediately and comprehensively from July 27, 2015.
Ex-Audi boss
Rupert Stadler is already standing in front of the Munich district court because of a possible joint responsibility for the manipulated exhaust gas values.
(Photo: Reuters)
The lawyers also found breaches of duty at the ex-Audi boss Stadler and the former Audi development directors Ulrich Hackenberg and Stefan Knirsch as well as ex-Porsche development director Wolfgang Hatz and Heinz-Jakob Neußer, the ex-development director at Volkswagen.
VW originally asked for more than a billion euros
VW then initially demanded one billion euros from Winterkorn, while the other managers were supposed to pay millions in some cases. The company then evidently quickly moved away from these unrealistic demands. According to insider circles, however, the pressure on the managers was kept high. The signal: If an agreement cannot be reached quickly, claims for damages will follow. The goal: A comparison should be found before the Annual General Meeting in July.
A few days ago, negotiating circles announced that they were not on the home straight yet. But now, according to information from the Handelsblatt, all six board members will come to an agreement in the coming days.
Today, Tuesday, the insurers with whom Volkswagen had taken out a so-called D&O insurance with a coverage of 500 million euros for its top managers will meet. In principle, you should be prepared to pay 200 to 300 million euros in a coverage comparison. However, there should still be disagreements in the group of more than a dozen insurers at one point or another. The insurers obviously only assume negligent breaches of duty on the part of the managers.
Once the agreements are in place, the supervisory boards of VW, Audi and Porsche should approve them at the weekend. The VW Group Supervisory Board will meet on Saturday. The invitations for the Annual General Meeting should then be launched.
If Winterkorn actually contributed ten million euros from his private coffers, he would get off relatively lightly measured by his assets and his earnings. For years, Winterkorn was one of the top earners among the Dax board members.
On the other hand, a private contribution of ten million euros in a D&O case would be record breaking. For comparison: the former Deutsche Bank boss Rolf Breuer paid 3.2 million euros out of his own pocket in the Kirch case, and ex-Siemens boss Heinrich von Pierer paid five million euros after the corruption scandal.
Insurers would have to pay a record amount
The possible contribution of the D&O insurance consortium around Zurich and Allianz of up to 300 million euros is also unprecedented. In the Siemens case, the insurers contributed 100 million euros. A consortium paid an even larger amount – almost 170 million euros – because of a statement made by the then Daimler-Chrysler boss Jürgen Schrempp. He had said that the merger of Daimler and Chrysler in 1998 was not a merger of equals, but a takeover. This resulted in massive investor lawsuits and enormous damage.
The settlement payments could flow in the second half of the year. Michael Hendricks, expert on manager liability and D&O insurance, assumes that a settlement will settle all civil law obligations between VW, the insurers and the managers – although the criminal proceedings have not yet been concluded and judgments are pending.
In principle, insurers do not pay for deliberate criminal offenses. “However, it has little to do with practice. The insurers also get involved in deals if this question has not yet been clarified, ”explains Hendricks. However, it is not self-evident that the parties would come to an agreement as quickly as in this case.
All the board members concerned have always rejected breaches of duty to this day. There are already indictments against all six, and Stadler and Hatz are currently on trial in the Munich Regional Court.
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