Ex-Volkswagen, Audi bosses to repay millions over dieselgate scandal

The Volkswagen Group will force embattled former CEO, Dr Martin Winterkorn, and other past executives to pay back millions of euros in bonuses after finalising its report into the dieselgate scandal.

Critically, the five-year Gleiss Lutz forensic investigation into the €30 billion ($A46.3bn) crisis effectively cleared current Volkswagen Group CEO Herbert Diess and supervisory board chairman Hans-Dieter Pötsch, finding they had no prior knowledge of the fraud.

VW’s internal investigation concluded there were "no breaches of duty by other members of the group board of management".

The payback demand for Dr Winterkorn (below), former Audi CEO Rupert Stadler and former Volkswagen Group powertrain boss Wolfgang Hatz came as the VAG board finally drew a line under the crisis that threatened to sink the world’s biggest car-maker.

"The specified persons will now have claims for damages asserted against them," the Volkswagen Group supervisory board said in a statement.

The investigation into the diesel emissions-cheating scandal that rocked the world’s biggest auto-maker in 2015 asserted that Dr Winterkorn acted illegally before, during and after the scandal broke, but that Stadler breached his duties of care only after the crisis came to light.

“The supervisory board has concluded that Professor Winterkorn breached his duties of care as former chairman of the board of management of Volkswagen AG by failing, in the period from 27 July 2015 on, to comprehensively and promptly clarify the circumstances behind the use of unlawful software functions in 2.0l TDI diesel engines sold in the North American market between 2009 and 2015,” a statement from the VAG supervisory board read.

"Winterkorn also failed to ensure that the questions asked by the US authorities in this context were answered truthfully, completely and without delay.”

Winterkorn is also dealing with 2018 criminal charges in both Germany and the US over the scandal, which saw almost 12 million diesel-powered Volkswagens affected around the world.

Winterkorn received a €7.3 million payout when he was pushed aside in 2015, and €5.9 million of that was in “performance-related bonuses” in the annual report. The Volkswagen Group also held a €28.5 million pension pot for him.

He was paid nearly €16 million in 2014 and was in line for a payout of two years’ salary, though only if his termination was “through no fault of the board of management member”.

Winterkorn has maintained he was not aware of any wrongdoing, though fellow Volkswagen executive Heinz-Jakob Neusser (above) insisted Winterkorn told managers to hide evidence from US investigators.

“Winterkorn decided and ordered it, and there was no further discussion,” Neusser said.

“The supervisory board also concluded that [former Audi CEO] Rupert Stadler breached his duties of care by failing, in the period from 21 September 2016 on, to ensure that 3.0l and 4.2l V-TDI diesel engines developed by Audi and installed in EU vehicles of Volkswagen, Audi and Porsche were investigated with regard to unlawful software functions.”

Stadler was paid an €8 million ($A12.78m) sweetener to relinquish his roles on both the Audi and Volkswagen AG boards, but the payout was contingent upon his innocence in both criminal activity and the Gleiss Lutz report.

The supervisory boards of Audi and Porsche also examined the Gleiss Lutz report and both concurred with the “expert opinion” of the report’s conclusions.

That means former Audi board members Professor Ulrich Hackenberg and Dr Stefan Knirsch and ex-Porsche board member Hatz have also been accused of breaching their management duty of care under stock corporation law over dieselgate.

All three will, like Dr Winterkorn and Stadler, be served with demands that they pay back any payouts received when they left the companies in the wake of the scandal.

The Volkswagen Group had already pushed its claims for compensation against former member Volkswagen Cars board member Dr Heinz-Jakob Neusser prior to the report’s release.

Neusser is also facing criminal charges in the US and cannot leave Germany, which does not allow the extradition of its citizens.

Hatz, Stadler and Neusser have all spent time in German prisons, with the criminal prosecution for fraud and false advertising for Hatz and Stadler beginning in Munich last September.

Stadler (below), 57, faces five years in prison if convicted in a trial expected to run in to the end of 2022. He has already spent nearly five months in pretrial detention.

Hatz spent nine months in a Munich prison in 2018, but was released due to ill health after surrendering a €3 billion surety, his passport and German identity card and agreeing to wear an ankle bracelet and report to Stuttgart police twice a week.

He received his own payout of €13 million in 2017 when he was sacked over dieselgate. It, too, was contingent on his dieselgate innocence.

For Knirsch, the investigation’s conclusions are doubly painful, having lost the job of Daimler’s director of development post-Audi because he could not meet its standards of compliance.

Other Volkswagen managers charged in Germany over dieselgate include diesel engine development boss Falko Rudolph and ex-diesel developer Rudolph Krebs.

The first Volkswagen Group executive convicted over dieselgate, Oliver Schmidt, was released in January after serving half of his seven-year sentence for conspiracy to defraud the US Government over emissions.

The Volkswagen Group also insisted the investigation was the “most comprehensive and complex investigation carried out in a company in German economic history" with more than 65 petabytes of data, more than 480 million documents and more than 1500 interviews.

The technology behind dieselgate allowed Volkswagen to skirt emissions limits by only running its NOx-cleaning systems when the car was in a laboratory.

It sprang from Audi’s use of the technology to keep its diesels quiet on cold starts, because they were too noisy as they were warming up. The Audi engineers created the software to check whether or not the car was in a laboratory, using steering, parking and accelerator pedal sensors.

Audi called it the “acoustic function”, but while its main role was to reduce noise it also made the cars temporarily compliant with emissions rules.

In the real world, though, it left the cars effectively without any emissions treatments because the Volkswagen Group used it to save money on NOx-scrubbing hardware.