Global Economics

Former VW CEO Pi?ch Under Scrutiny


As head of Volkswagen for nine years, Piëch had a reputation for knowing all that went on beneath him. Did that include alleged bribery and embezzlement?

When asked whether it was reasonable to believe that the former CEO of VW was unaware of lavish pleasure trips for labor representatives and millions in payments to Klaus Volkert, the former head of the labor council, Volkert said, in a documentary aired on German TV: "All I know is that there is very, very little that went on at Volkswagen that (Ferdinand) Piëch didn't know."

State prosecutors assumed that Piëch, who now serves as head of the supervisory board at VW, was aware of the extensive company perks that have led to a high-profile trial in Brunswick, not far from Wolfsgurg.

Volkert and former Volkswagen personnel manager Klaus-Joachim Gebauer are now defending themselves in the trial against allegations of bribery and embezzlement. But prosecutors, up till now, had no concrete evidence to launch an investigation against Piëch.

This could now change, if credence can be given to new information revealed by a journalist working for a German TV network. In a documentary, the reporter claims that a retired VW employee told him that former Chief Financial Officer Bruno Adelt questioned CEO Piëch about the "account 1860" slush fund, which was used to document the costs of the pleasure trips. Piëch, says the employee, asked Rupert Stadler, the head of his office at the time and CEO of Audi today, to look into the matter. "It is reasonable to assume that Mr. Piëch was informed about the results of the investigation he ordered," says senior state prosecutor Ralf Tacke.

If that's true, Piëch must have known about the pleasure trips, which included the services of prostitutes and were charged to corporate accounts in one of the worst corruption scandals in VW history. When he was questioned on March 29, 2006, however, Piëch said he knew nothing about the trips.

The court now plans to question the new witnesses. But with or without their testimony, Piëch could face charges arising from information discovered in the proceedings against Volkert and Gebauer. A document that has appeared as evidence in the case suggests that Piëch knew more than he has admitted to so far. The document relates to a pension commitment to Volkert.

'I delegated it'

Piëch told prosecutors that he had "never distributed money," washing his hands of the matter by claiming, "I delegated it to someone else." That someone else was former personnel chief Peter Hartz.

Hartz approved payments of up to €290,000 per year to Volkert -- totalling around €2 million -- and testified that it was his decision alone to funnel the money through special bonuses. He said Piëch knew nothing about it.

Prosecutors find the testimony hard to believe. First, Volkert has testified in court about discussing perks with Piëch in 1994. According to Volkert, Piëch told him that he had nothing to worry about -- he would be treated as a brand manager, and Hartz would come to him later and discuss the matter in detail.

The other reason prosecutors have found to doubt Piëch's innocence is that Hartz was always an extremely cautious manager. He had only been with the VW Group for a little over a year when he supposedly became involved -- acting alone, no less -- in the risky affair which would later land him a two-year suspended sentence with probation.

But the investigators had no direct proof that Piëch could have known about the payments until Volkert's attorney, Johann Schwenn, handed the court a document dated May 11, 1998.

The document is an amendment to a "Special statement on company retirement pensions." It stipulates that instead of 40 percent of his last salary, Volkert was to receive up to 50 percent upon retirement.

This increase in Volkert's pension benefits represents the same kind of preferential treatment as the special bonus payments approved by Hartz. And, as with the bonus payments, everything was under the table. The document was not kept in Volkert's personnel file.

With these payments, however, Piëch cannot claim ignorance. The signatures of both Hartz and Piëch appear on the document, which is marked "personal and confidential."

Prosecutors will now have to determine whether the pension boost for Volkert constitutes a breach of fiduciary duty, or whether it proves that Piëch must have known about the special bonus payments. How could Hartz have ordered the payment of a little less than €2 million in special bonuses without Piëch's approval, if he had already obtained the CEO's consent to a relatively small increase in the pension commitment?

New information could emerge as the case continues. Helmut Schuster, the former head of VW's Czech subsidiary, Skoda, will testify soon. Schuster has already said that older members of the company's board "all knew about" the affair, but he reserved the right to "provide specific information about the details" at a later date.

Translated from the German by Christopher Sultan

Provided by Spiegel Online—Read the latest from Europe's largest newsmagazine

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