Why is the SEC suing VW and its former CEO over the diesel scandal?

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SEC Alleges Massive Fraud on US Investors by Volkswagen in Diesel Emissions Scandal

The U.S. Securities and Exchange Commission (SEC) is suing Volkswagen (VW) and its former chief executive Martin Winterkorn, alleging a "massive fraud" perpetrated on U.S. investors in connection with the company's diesel emissions scandal. The SEC contends that VW misled investors by issuing over US$13 billion in bonds and securities while senior executives were aware that more than 500,000 U.S. diesel vehicles violated legal emissions limits. The agency seeks to recover ill-gotten gains, impose civil penalties, and prevent Winterkorn from holding officer or director positions in U.S. public companies.
Allegations of Deception Regarding Emissions Non-Compliance

The SEC's civil complaint details that between April 2014 and May 2015, VW issued substantial amounts of bonds and asset-backed securities in U.S. markets. During this period, senior executives allegedly possessed knowledge that over half a million U.S. diesel vehicles were exceeding permissible vehicle emissions standards due to the use of illegal "defeat device" software. This software was designed to cheat government exhaust emissions tests, a fact VW later admitted to in 2017 when it pleaded guilty to felony charges in the U.S.
Financial Benefits Gained Through Misleading Practices

According to the SEC, Volkswagen "reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company." The agency asserts that VW deliberately "repeatedly lied to and misled United States investors, consumers, and regulators" as part of an elaborate scheme to sell both its purportedly "clean diesel" cars and billions of dollars worth of corporate bonds and other securities within the United States. Despite these alleged fraudulent gains, the SEC states that VW has "never repaid the hundreds of millions of dollars in benefit it fraudulently obtained."
Pursuit of Penalties and Individual Accountability

The lawsuit filed by the SEC aims not only to recover financial penalties and interest but also to hold individuals accountable. Specifically, the agency seeks to bar Martin Winterkorn, the former CEO who resigned in September 2015, from serving as an officer or director of any public U.S. company. Winterkorn had previously been charged by U.S. prosecutors in 2018 for his alleged role in conspiring to conceal the automaker's emissions cheating activities. The SEC's action also names VW Credit and Volkswagen Group of America Finance LLC as defendants.

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Why is the SEC suing VW and its former CEO over the diesel scandal?

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