Volkswagen is looking to outside counsel for assistance – and is making changes internally in its corporate structure – as it responds to a far-reaching and embarrassing emissions scandal.
The company already announced it will be engaging “German and US lawyers to objectively investigate and fully clarify the manipulation of emissions data of diesel engines.”
The VW board has also engaged a U.S. law firm “to assist in further clarification and in preparing the necessary steps” as the company responds to the controversy. Bloomberg News has reported that Kirkland & Ellis was hired by VW.
Meanwhile, German prosecutors are investigating former VW CEO Martin Winterkorn, and the U.S. Justice Department’s Environment and Natural Resources Division is investigating the company, according to news reports. State attorneys general in the United States and government agencies in other nations are conducting their own inquiries, too.
In addition, the board said the company will immediately suspend some employees. Matthias Müller, chairman of Porsche, was named the new VW CEO.
The events come after revelations that Volkswagen allegedly deceived regulators by lowering emissions on its 2009-2015 Volkswagen and Audi diesel vehicles by using “defeat” devices. Some 482,000 vehicles sold in the United States and 11 million cars sold worldwide were involved.
Already, the Supervisory Board of Volkswagen approved a new management structure for the group and the brands, as well as for the North American region.
“The new structure strengthens the brands and regions, gives the Group Board of Management the necessary leeway for strategy and steering within the company, and lays a focus on the targeted development of future-oriented fields,” Berthold Huber, interim chair of the Supervisory Board, said in a statement.
The board issued an additional statement, which said in part, “There is absolutely no excuse for the manipulations which have deeply shocked Volkswagen. The company will leave no stone unturned in getting to the bottom of this, will call those responsible to account, and take the necessary actions.”
One of the plaintiff’s lawsuits filed against VW was from the Hagens Berman law firm. It claims fraudulent concealment, false advertising and violations of federal and state laws.
The firm says it “expects to have cases on file with class representatives from every state.”
“Hundreds of thousands of consumers put their trust in VW when they looked to its ‘CleanDiesel’ line for an efficient, environmentally conscious diesel option,” Steve Berman, managing partner of Hagens Berman, said in a statement. “But for years, VW cheated the system. Its TDI line of fast but ‘good-for-the-environment’ cars seemed too good to be true, and they were…. When Volkswagen decided to write and use software to fool regulators, it showed its true colors and blindsided millions of consumers who had placed their trust in VW.”
As the Justice Department starts its investigation, Senators Richard Blumenthal (D-Conn.) and Amy Klobuchar (D-Minn.) wrote Attorney General Loretta Lynch for a “thorough but expeditious” investigation.
“Officials at Volkswagen should be granted no get out of jail free card, and the [Justice] Department should accept no plea agreement with Volkswagen that does not ensure any and all information regarding criminal acts by high level officials is provided to the Department,” the letter said.
When asked to comment, Jean-Marc Levy, president of LRN, an ethics and compliance firm, told InsideCounsel, “The VW scandal will likely be a seminal moment in the history of the ethics and compliance field; its impact could be as significant as the Enron fraud.”
“VW will be under a great deal of scrutiny going forward to demonstrate that a values-based culture of ethical behavior is fostered at all levels of the organization,” he added. “In order to do that, VW senior leadership, with the full support of the legal and compliance functions, as well as line management will need to radically and expeditiously assess what in the … culture inhibited anyone from speaking out, and make the necessary changes for VW to become a safe place for people to voice concerns.”
The role of the board will be important as the company responds to the incident. “VW needs to acknowledge that its board and management have been emphasizing financial engineering over values-based innovation and operations,” Levy explained. “VW needs to redefine what it stands for at the board level.”