EVERYBODY’S BUSINESS - Prosecuting the Boss

Written by Philip Mattera

A courtroom in Germany has recently been the scene of a rare occurrence in the business world: the trial of a high-level executive for corporate crimes. Martin Winterkorn, the former top executive of Volkswagen, is facing charges of commercial fraud, market manipulation and making false statements.

Arguably, he should be facing even more serious allegations. Winterkorn is being belatedly tried in connection with the vast conspiracy in which Volkswagen executives conspired to deceive regulators and the public about the environmental impact of its diesel cars. By rigging the vehicles so their emissions appeared to be within legal limits when they were actually much higher, VW was responsible for releasing vast amounts of extra pollution into the air. The health effects are incalculable.

Winterkorn’s trial, delayed for health reasons, began nine years after the emissions scandal erupted. And a month after proceedings began, the trial was postponed against due to claims about his poor health.

During the past decade, Volkswagen has faced perhaps the most wide-ranging regulatory barrage in business history.

In the United States, VW paid a series of enormous penalties. These included a $14.7 billion settlement with the federal government and the state of California announced in 2016. The deal included $10 billion to be used for buying back vehicles with the illegal defeat devices and $4 billion to mitigate pollution from the cars and invest in green vehicle technology.

The following year, VW paid another $4 billion to settle a case brought by the Federal Trade Commission concerning another group of vehicles. The company pled guilty to three felony counts and paid a criminal penalty of $2.8 billion. VW also paid out large sums to other state governments, including an $83 million settlement with Texas and a $40 million payment to Arizona.

In 2024 the U.S. Securities and Exchange Commission fined VW more than $48 million for floating bonds a decade earlier without informing investors about the risks to its financial condition and reputation from the emissions cheating.

VW has also faced regulatory actions and lawsuits around the world. Here are some of the most notable cases documented in the new Violation Tracker Global.

In its home country of Germany, VW was fined the equivalent of $1.2 billion in a case brought by government prosecutors and another $900 million in a lawsuit brought by the Federation of German Consumer Organizations.

In a case brought by Environment and Climate Change Canada, VW paid a fine equal to $150 million. The Australian Competition and Consumer Commission fined VW the equivalent of $86 million for deceiving customers about compliance with Australian diesel emissions standards.

India’s National Green Tribunal fined VW 5 billion rupees (US$71 million) for installing the cheating devices. South Korea’s Fair Trade Commission fined VW the equivalent of $31 million for false advertising on vehicle emissions. Among the other countries that penalized VW are Poland ($31 million), Brazil ($13 million), the Netherlands ($536,000), and Taiwan ($160,141).

The emissions scandal has not been the only stain on VW’s record in recent years. It has also paid antitrust penalties. These include a 160 million euro fine imposed by the Italian Competition Authority on VW’s finance arm and a 502 million euro fine brought by the European Commission for breaching EU antitrust rules by colluding on technical development in the area of nitrogen oxide cleaning.

Most recently, Britain’s Financial Conduct Authority fined Volkswagen Financial Services (UK) Limited £5,397,600 for failing to provide fair treatment to its customers in financial difficulty. Among other things, the company repossessed vehicles from vulnerable customers without considering other options. In addition to the fine, Volkswagen Finance agreed to pay over £21.5m in redress to around 110,000 customers who may have suffered harm because of its failings.

As important as these cases have been in highlighting VW’s egregious misconduct and extracting financial penalties, the individual prosecution of Winterkorn could have a greater long-term impact. Even though he is no longer employed by the company (he resigned under pressure in 2015), his trial is a demonstration of how a high-level executive can be held personally accountable for misdeeds under his watch. This is especially true in a case such as Winterkorn’s in which the executive is accused of committing some of those misdeeds himself.

If convicted, Winterkorn, in his late 70s, is unlikely to spend time behind bars. But a guilty verdict would send a strong signal to other unscrupulous executives that they will be held accountable for misconduct that occurs on their watch.

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