Last week’s news that Volkswagen had summarily departed its top ethics and compliance officer was punctuated by more bad news for the company when it was reported that the company’s former chief executive Martin Winterkorn was named as a suspect in a fraud investigation brought by the German government. Through new evidence obtain in a massive culling of documents secured in sweeps through some 28 private residences and extensive interviews, the authorities “have expanded the number of suspects under investigation to 37 from 21.” This includes former CEO Winterkorn.
This will surely come as very bad news for VW, as it was beginning to pick up the pieces of its shattered reputation from the emissions-testing scandal. Earlier this month, the company had settled with the U.S. government by agreeing to plead guilty to conspiracy to defraud the U.S. government and agreeing to pay a $4.3 billion criminal fine in addition to the civil penalty of $17.5 billion from 2015.
If German prosecutors conclude that Winterkorn did have knowledge or was involved, it could certainly widen the scope of the U.S. criminal investigation for individuals. The effect has already been seen when VW sent a very reduced contingent to Detroit for the annual premier auto show in the United States. While the company said the reduced retinue from Germany was due to cost cutting, there would seem to be a palpable fear from German executives of arrest if they subject themselves to U.S. jurisdiction. This fear was realized when one of their number, Oscar Schmidt, was arrested at the Miami airport attempting to return to Germany after a holiday in America earlier this year.
With the German investigators looking into whether a company attorney encouraged other VW employees to illegally destroy documents after the U.S. probe began, it may well be a long hard drive for the former world’s leader in automobile sales. And for former CEO Winterkorn, I would hold off on that trip with the family to Disney World for about five years.