It was a record deal: Volkswagen received around 288 million euros back from former CEO Martin Winterkorn, ex-Audi boss Rupert Stadler and other former managers and insurers for breaches of duty in the diesel scandal. But many VW shareholders were not impressed. On the contrary: They attacked the group management hard for the comparison – and complained to the district court in Hanover. Last week, there was a first meeting of the opponents in court. On the one hand there was the protective association for investors with the law firm Reitze Wilken from Cologne and the consumer center for investors with the Berlin lawyer Martin Weimann. On the other hand, Volkswagen with its legal representatives, top-class lawyers from the law firms Linklaters and Gleiss Lutz.
The lawsuit relates to the settlements decided at the Annual General Meeting in July 2021. The shareholder representatives are of the opinion that these are void for various reasons. The comparison violates the interests of society and is abusive.
On September 23, 2015, Winterkorn had to leave as VW CEO. A few days earlier, the US Environmental Protection Agency (EPA) made public the scandal surrounding manipulated diesel engines. The Executive Committee of the Supervisory Board said goodbye to the boss with a carte blanche: “Professor Dr. Winterkorn had no knowledge of the manipulation of exhaust gas values.” It was noted with “great respect” that he was willing to take on responsibility.
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After many years of reappraisal, a different picture emerges. Prosecutors have charged Winterkorn with fraud. Only because of the 75-year-old’s health problems could the criminal case against him not yet begin.
VW sees “duty of care” violated
Even Volkswagen, after years of enlightenment, now sees Winterkorn as taking responsibility. According to the findings, the manager violated his due diligence obligations under stock corporation law as CEO. Specifically, as of July 27, 2015, he failed to immediately and comprehensively clarify the background to the use of impermissible software functions in diesel engines. The lawyers call this “organizational fault”.
The result: Wolfsburg took Winterkorn and four other ex-managers into recourse. After several years of examination of the law firm Gleiss Lutz, an agreement was quickly reached. Winterkorn will receive 11.2 million euros as part of the settlement, while ex-Audi boss Stadler, who has been on trial in Munich since autumn 2020, will have to pay 4.1 million euros. So-called D&O insurers, who protect executives against claims for damages, take on the majority.
More compensation payments by Winterkorn and Co.?
The shareholder representatives do not agree with this. “Obviously existing claims for damages, the assertion of which would not involve any significant litigation risk, are compared to an amount of less than one percent of the total damage,” complained the SdK lawyers. “And this despite the fact that the people involved in particular are able to pay far greater damages.”
Rupert Stadler
The former Audi boss has been on trial in Munich since autumn 2020.
(Photo: dpa)
They calculated what could have been gotten from Winterkorn and Stadler. The manager has held management positions in the group since 1996, and in the four years prior to his departure he earned around 15 million euros. For the years 2007 to 2015, he posted total payments of around 103 million euros. Since then, there has also been an annual pension of 1.2 million euros.
So far, the diesel scandal has caused damage of around 32 billion euros. Under these conditions, it is not justifiable to be satisfied with 11.2 million euros. “Prof. Dr. Winterkorn only cheated around two-thirds of its annual [!] remuneration in the years before the exhaust gas fraud became known,” the lawsuit states. The compensatory as well as the deterrent function of the law on damages would thus be completely missed.
Carte blanche for numerous diesel scandal participants
The situation is similar with former Audi boss Rupert Stadler and the three other ex-managers. In fact, Stadler does not have to pay a cent because the claim is offset against outstanding bonuses. It is also questionable that Volkswagen only assumes organizational culpability in the case of a few people, even though the group of executive and supervisory board members was much larger.
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From the point of view of the protective association of small shareholders, the resolutions were also made prematurely. But there could still be billions in damage. It will probably be years before the case is legally settled. A class action lawsuit is currently still pending from shareholders, who are demanding billions in compensation because they think VW informed them about the diesel disaster too late.
The plaintiffs also do not want to accept the secrecy of the group. Volkswagen omits important information. This has already been shown in the investigation of the diesel scandal by the law firm Jones Day. The results are still under lock and key – although the chairman of the supervisory board, Hans Dieter Pötsch, initially promised to make the results transparent. Another 2,000-page, 100-million-euro Gleiss-Lutz report served as the basis for the comparison with the managers. This paper also remains under lock and key.
Special test at VW is pending
After all, shareholder representatives have succeeded in enforcing a special audit in court. VW doesn’t challenge that. “The conclusion of the settlement agreement is also permissible regardless of the order for the special test,” said a VW spokesman. To which the plaintiffs reply: “This is precisely what is wrong. The settlement and waiver resolution is blocked from the outset and is also inappropriate and hasty.”
The fact is that the resolutions at the general meeting went smoothly. Porsche SE, in which the Porsche and Piëch families pool their shares, the state of Lower Saxony and Qatar Holding together hold almost 54 percent of the VW shares. More than 99 percent of those entitled to vote supported the resolutions. A VW spokesman therefore sees the group as confirmed: “The actions for annulment are unfounded in every respect.”
The court in Hanover wants to announce its decision on September 14th.
More: Why VW looks bad in a dispute with fired engineers.
This article first appeared on June 8th, 2022 at 11:20 am.