VW Hit With New Lawsuits by Investors, Former Employee

Embattled maker accused of destroying diesel data.

by on Mar.15, 2016

VW officials initially thought the scandal would have a minimal financial impact.

Already facing more than 500 lawsuits in the U.S., Volkswagen has been hit with two new legal actions that could seriously compound the problems it is facing in the wake of revelations it cheated on diesel emissions tests.

One suit, filed in Germany by major institutional investors, seeks nearly $3.6 billion due to the lost value in Volkswagen shares which have plunged by a third since the scandal broke last September. The other new legal action was initiated by a former VW employee who claims he was fired after trying to prevent the deletion of data connected to emissions test cheating.

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The latter suit could prove particularly problematic as Volkswagen is under criminal investigation in several countries, including both the U.S. and Germany, and was ordered to preserve potential evidence related to its admitted rigging of diesel tests.

(VW dealers up in arms over firing of top U.S. exec. Click Here for more.)

The number of lawsuits facing VW has been rapidly rising since the U.S. Environmental Protection Agency revealed last September 17th that VW had installed a so-called “defeat device” on vehicles equipped with its 2.0-liter turbodiesel. The software was designed to detect when a vehicle was undergoing emissions tests, adjusting its operations to meet tough U.S. standards for smog-causing oxides of nitrogen.

CEO Matthias Mueller has now warned that the cost of settling the case will be "substantial."

VW quickly acknowledged the subterfuge, which impacted 11 million vehicles worldwide. It subsequently admitted rigging its 3.0-liter turbodiesel as well. All told, about 600,000 vehicles using the two engines were sold in the U.S.

A federal court in San Francisco has been assigned the task of hearing most of the initial lawsuits, largely those filed on behalf of owners who claim damages, such as the loss of their vehicles’ trade-in value.

But the latest action, filed in a German court, represents investors from 14 countries, including the U.S., Germany, Great Britain, Canada, the Netherlands and Australia. The list of plaintiffs includes the giant California government employee pension fund, CalPERS. The suit was filed by attorney Andreas Tilip, who already has initiated legal claims on behalf of individual investors.

As with the earlier lawsuit, the pension funds charge VW with knowingly hiding information about the diesel cheating – recent reports in German media suggest top management may have known about the issue as far back as May 2014. As a result, investors claim they have lost significant value in their Volkswagen holdings.

(VW CEO alerted to diesel problem in early 2014, reports say. Click Here for more.)

The company’s shares closed at 112.40 euros on Tuesday, down roughly a third since the diesel scandal broke last autumn.

VW is facing a variety of different legal challenges. The U.S. Justice Department, for one, brought a civil case against the German carmaker earlier this year seeking as much as $41 billion in fines. But authorities are also moving forward with a separate criminal investigation.

A judge in California has given VW until March 24 to come up with a fix for its diesels.

And that could become more complicated if claims by an unidentified former U.S. employee proves accurate. A report jointly produced by German broadcasters WDR and NDR as well as the Sueddeutsche Zeitung newspaper indicates VW is now being sued by the employee for unlawful termination. He claims he was fired after trying to prevent the illegal deletion of corporate records related to the diesel scandal.

VW had been ordered by the Justice Department to maintain all related data pending the various legal challenges.

The automaker declined to respond, noting, “These are legal proceedings concerning labor law on which we don’t comment as a matter of principle.”

The employee worked out of a data center in the Detroit suburb of Auburn Hills and filed suit under Michigan law meant to protect whistleblowers.

(U.S. auto sales surge – but VW takes another tumble. Click Here for February’s results.)

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