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WASHINGTON Volkswagen AG and former
Chief Executive Officer Martin Winterkorn must defend an
investor lawsuit in California over the company’s diesel
emissions cheating scandal, a U.S. judge ruled on Wednesday.
U.S. District Judge Charles Breyer also rejected a request
by VW brand chief Herbert Diess to have the proposed securities
fraud lawsuits tossed out of a California court. Other
defendants include VW’s U.S. unit and its Audi of America unit
and the former head of its U.S. unit, Michael Horn.
The investors suing are mostly U.S. municipal pension funds
that invested in VW through American Depositary Receipts (ADR), a form of equity ownership in a non-U.S. company that
represents the foreign shares of the company held on deposit by
a bank in the company’s home country.
Volkswagen argued that German courts were the proper place
for investor lawsuits.
Breyer said in his ruling that “because the United States
has an interest in protecting domestic investors against
securities fraud” the lawsuits should go forward in a U.S.
The pension funds include those representing Arkansas State
Highway Employees and Miami Police. The lawsuits said VW’s
market capitalization fell by $63 billion after the diesel
cheating scandal became public.
A VW spokeswoman had no immediate comment Wednesday.
Winterkorn resigned days after the scandal became public and
much of the company’s management has changed since 2015.
VW in September 2015 admitted using sophisticated secret
software in its cars to cheat exhaust emissions tests, with 11
millions vehicles worldwide affected. The cheating allowed
nearly 580,0000 VW’s U.S. diesel vehicles sold since 2009 to
emit up to 40 times legally allowable pollution levels.
The lawsuits said VW and its executives misled the investing
public “assuring them to the contrary – namely, that the diesel
vehicles met all applicable emissions standards” and it “understated the liabilities that it would suffer as a result of
its known emissions non-compliance.”
Volkswagen has agreed to spend as much as $17.5 billion in
the United States to resolve claims from owners and federal and
state regulators over polluting diesel vehicles.
Volkswagen could still spend billions of dollars more to
resolve a U.S. Department of Justice criminal investigation and
federal and state environmental claims; come under oversight by
a federal monitor and face other conditions.
The Justice Department and VW are in settlement talks and it
is possible a deal could be reached before Jan. 20, when
President Barack Obama leaves office, according to sources
briefed on the matter.
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