INTERNATIONAL - Porsche SE’s board was ordered by a German court to answer critical shareholder questions about what management at Volkswagen AG and Porsche knew about the diesel scandal and whether any evidence was destroyed.
The holding company’s board must answer five questions related to the issue originally asked at its 2016 annual shareholder 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.
Porsche and Volkswagen are both facing investors suits seeking billions of euros in damages that hinge on what top managers knew when about the diesel scandal. They have both avoided answering these types of questions, citing ongoing investigations, including one by law firm Jones Day on behalf of 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 control VW, is effectively run by the same group of people as the car maker with many managers serving on the boards of both companies. Porsche SE 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 Porsche SE directly.
While Porsche has said it will appeal the ruling on the shareholder meetings, the court didn’t give Porsche permission to appeal the judgment ordering it to answer questions. Porsche spokesman Albrecht Bamler declined to comment beyond reiterating that it would appeal.
49 Queries
Martin Weimann, the lawyer for the shareholder, said he will wait to see whether Porsche actually files an appeal before taking further steps to force the company to turn over the answers. The court rejected requests to answer a further 49 queries from the shareholders.VW has faced a non-stop barrage of investigations and lawsuits since U.S. authorities disclosed in September 2015 that the company had been cheating on tests that measure the emissions of 11 diesel cars worldwide. The company has already paid out more than 25 billion euros in fines, settlements and other costs since the scandal came to light.
The German court’s decision comes 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 its compliance systems that were stepped up in the wake of the scandal. Any evidence showing the top brass knew about the diesel scandal or leaned about it earlier than September 2015 could inflate financial risks for both companies.
The court took VW’s crisis management to task, saying it failed to prevent employees from destroying evidence, which hindered U.S. authorities’ investigations, according to the rulings. Porsche’s board also committed a "grave violation" by not setting up its own investigation into how VW managed the crisis, the court said.
The cases are: LG Stuttgart, 31 O 28/16 KfH AktG and 31 O 33/16 KfH.