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SEC Explains Delay In Action Against Volkswagen After Diesel Scandal

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The Securities and Exchange Commission in a court filing on Monday explained the delay in taking action against Volkswagen for almost two years even after the German automaker pleaded guilty in the diesel emissions scandal.

The agency said the company dragged an investigation into whether it defrauded U.S. bond investors by providing false and misleading statements about vehicle quality.

It was in 2015 that the company was caught using illegal software in thousands of vehicles to cheat U.S. pollution tests. In 2017, the automotive giant pleaded guilty to criminal charges.

However, only in March this year the SEC filed a civil suit, charging Volkswagen and its former CEO, Martin Winterkorn, for defrauding U.S. investors in bond offerings. In its complaint, the SEC had noted that Volkswagen's more than $13 billion in bonds and asset-backed securities issued in the U.S. markets was at a time when senior executives knew that more than 500,000 vehicles in the U.S. grossly exceeded legal vehicle emissions limits.

The complaint alleged that the company reaped hundreds of millions of dollars in benefit by issuing the securities at more attractive rates.

U.S. District Judge Charles Breyer in May had asked why the agency waited two years to file the suit after the company settled the criminal investigation by the U.S. Justice Department in 2017, pleading guilty to charges and paying $4.3 billion in penalties.

In its latest court filing, the SEC said there were months of extensive settlement talks with the company before deciding to file the lawsuit. The SEC delayed its action to immediately issue formal subpoenas as the company agreed to voluntarily produce materials. It handed over about 2 million pages of records for the investigation.

The challenges included long delays by Volkswagen in producing documents and other information, as well as uncooperative witnesses.

Reuters reported, quoting the SEC that its "staff worked hard and as quickly as possible under very difficult circumstances to complete an investigation into numerous different securities offerings conducted by a foreign company and three of its affiliates over many years."

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