Porsche ordered to reveal who knew what about VW diesel scam

Porsche SE’s board was ordered by a German court to answer critical shareholder questions about what management at Volkswagen AG and the carmaker’s majority investor knew about the diesel scandal and whether any evidence was destroyed.

The holding company’s board must answer five questions originally asked at its 2016 annual shareholders meeting, a Stuttgart court said in two rulings issued shortly before Christmas. The judges also sharply criticized the two companies’ handling of the crisis, saying that VW failed to stop employees from dumping documents that might have helped the U.S. investigation into the manufacturer’s diesel- emissions test manipulation.

Porsche and Volkswagen are both facing investors’ lawsuits seeking billions of euros in damages that hinge on what top managers knew when about the diesel-engine rigging. They have both avoided answering these types of questions, citing ongoing investigations, including one by law firm Jones Day on behalf of Wolfsburg, Germany-based VW.

“Citing the investigation by Jones Day is no valid argument to deny the information, because hiring an external law firm normally doesn’t oblige the client to confidentiality,” the judges wrote. “The right of shareholders to information may not be foiled by citing external investigations.”

Porsche SE, the investment vehicle for the Porsche and Piech families that controls 52 percent of VW’s voting stock, is effectively run by the same group of people as the carmaker, with several managers holding dual roles. Porsche officials had declined to tell the shareholders when management learned about the cheating, citing confidentiality agreements with authorities and describing the matter as a topic that primarily affects VW and doesn’t involve Stuttgart- based Porsche directly.

While Porsche has said it will appeal the ruling on the shareholder meetings, the court didn’t give it permission to appeal the judgment ordering it to answer questions. Porsche spokesman Albrecht Bamler declined to comment beyond reiterating that the investment vehicle will appeal.

Martin Weimann, the lawyer for a shareholder that brought the lawsuits against Porsche, said he will wait to see whether the holding company actually files an appeal before taking further steps to force it to turn over the answers. The court rejected requests to answer a further 49 queries from the shareholder.

VW faces a barrage of investigations and lawsuits since U.S. authorities disclosed in September 2015 that the carmaker had rigged engines on 11 diesel models to cheat on emissions tests. The company has already paid out more than 25 billion euros (USD30 billion) in fines, settlements and other costs since the scandal came to light.

The German court’s decisions come at a delicate time for VW, the world’s largest automaker, which is being supervised by U.S. monitor Larry Thompson to ensure the effectiveness of compliance systems that were stepped up in the wake of the scandal. Any evidence showing the top brass knew about the emissions rigging or learned about it earlier than September 2015 could inflate financial risks for both companies.

In addition to the diesel woes, VW faces probes by German prosecutors into potentially excessive remuneration of labor officials, and an importer of its Skoda brand in Egypt is embroiled in a lawsuit over alleged bribery.

The Stuttgart court took VW’s crisis management in 2015 to task saying it failed to prevent employees from destroying evidence, which hindered U.S. authorities’ investigations, according to the rulings. Porsche’s boards also committed a “grave violation” by not setting up their own investigations into how VW managed the crisis, the court said. The automaker has claimed the engine rigging was done by a small group of engineers. U.S. court records show some 40 people destroyed thousands of documents when the cheating that stretched over almost a decade was about to come to light.Christoph Rauwald, Karin Matussek, Bloomberg