German prosecutors investigate former VW CEO on fraud allegations

German prosecutors launched an investigation on Monday into fraud allegations against former Volkswagen boss Martin Winterkorn over the carmaker’s rigging of diesel emissions tests.

“Based on public complaints which have been filed we have started an investigation into fraud allegations in relation to the VW emissions scandal. The complaints were against Dr Martin Winterkorn, so the investigation will seek to determine whether reasonable suspicion exists against him or other employees with positions of responsibility at VW,” Braunschweig-based chief prosecutor Birgit Seel said.

The investigation will focus on “fraud through the selling of vehicles with manipulated emissions data,” Braunschweig prosecutor Julia Meyer said, underlining Germany’s determination to find out who was responsible for a crisis that has tarnished the image of the country’s industry on the world stage.

Winterkorn quit last Wednesday after almost nine years at the helm of Europe’s largest carmaker, saying he had no knowledge of manipulation of emissions results.

The German company also suspended three top engineers as it tried to get to grips with a scandal which has knocked more than a third off its market value, threatens to rock the global car industry and could damage Germany’s economy.

Volkswagen has admitted cheating diesel emissions tests in the United States but Germany’s transport minister says it also rigged tests in Europe, where it has much bigger sales, and it faces the worst business crisis in its 78-year history.

Winterkorn, who was replaced on Friday (September 25) by company veteran Matthias Mueller, said when he quit last week that he was not aware of any wrongdoing on his part but wanted to give the company a new start. He also agreed to appoint a U.S. law firm to conduct a full investigation.

Volkswagen faces penalties up to $18 billion after being accused of designing software for diesel cars that deceives regulators measuring toxic emissions, the U.S. Environmental Protection Agency said yesterday.

“Put simply, these cars contained software that turns off emissions controls when driving normally and turns them on when the car is undergoing an emissions test,” Cynthia Giles, an enforcement officer at the EPA, told reporters in a teleconference.

Volkswagen can face civil penalties of $37,500 for each vehicle not in compliance with federal clean air rules.

There are 482,000 four-cylinder VW and Audi diesel cars sold since 2008 involved in the allegations.

If each car involved is found to be in noncompliance, the penalty could be $18 billion, an EPA official confirmed on the teleconference.

A U.S. Volkswagen spokesman said the company “is cooperating with the investigation; we are unable to comment further at this time.”

The feature in question, which the EPA called a “defeat device,” masks the true emissions only during testing and therefore when the cars are on the road they emit as much as 40 times the level of pollutants allowed under clean air rules meant to ensure public health is protected, Giles said.