The SEC is accusing Volkswagen and its former CEO of ‘massive fraud’

The US Securities and Exchange Commission is suing Volkswagen, accusing the German carmaker of carrying out “a massive fraud” by cheating on emissions tests.

The American market regulator said late Thursday that Volkswagen and former CEO Martin Winterkorn fraudulently raised billions of dollars from investors, including by overplaying the firm’s environmental credentials.

The German company admitted in 2015 to widespread cheating of carbon dioxide emissions tests using special software installed in millions of vehicles worldwide. Volkswagen has paid out more than $30 billion in penalties as a result of the scandal known as “dieselgate.”

The SEC’s complaint, filed in a federal court in San Francisco, relates to $13 billion in bonds and other securities that Volkswagen issued in 2014 and 2015. The lawsuit alleges that the company made false and misleading claims about its financial health and the environmental impact of its technology in order to sell the securities to investors at inflated prices.

The SEC alleges that senior Volkswagen executives were aware when the securities were sold that more than 500,000 of the company’s vehicles in the United States breached vehicle emissions limits.

“By concealing the emissions scheme, Volkswagen reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates for the company,” the SEC said in a statement. The complaint targets Volkswagen, two of its US subsidiaries and Winterkorn.

The SEC is seeking to recover “ill-gotten gains” from the automaker and impose civil penalties. It also seeks to bar Winterkorn from serving as a company officer or director in the United States.

A Volkswagen spokesman said Friday that the SEC’s complaint was “legally and factually flawed, and Volkswagen will contest it vigorously.”

The securities were “sold only to sophisticated investors, who were not harmed and received all payments of interest and principal in full and on time,” the spokesman. The complaint “repeats unproven claims” about Winterkorn who “played no part in the [securities] sales,” he added.

CNN Business wasn’t immediately able to reach Winterkorn for comment.

Winterkorn was indicted by US federal prosecutors last year on charges related to Volkswagen’s emissions scandal. The indictment alleged that he was aware that widespread emissions cheating was taking place and agreed with other senior executives that it should continue.

Winterkorn is not currently in custody and is believed to still be in his native Germany. He quit Volkswagen in 2015 as the scandal was unfolding.

The company is still facing a number of lawsuits, including one by shareholders in Germany who are claiming the company misled them. They’re demanding more than €9 billion ($10 billion) in damages.

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