German prosecutor searches VW's dieselgate law firm

FRANKFURT (Reuters) - German prosecutors have searched the offices of the law firm hired by Volkswagen VOWG_p.DE to investigate its diesel emissions test cheating, as they step up their efforts to identify those involved in the scandal.

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Europe’s biggest carmaker condemned the search, carried out on Wednesday but reported on Thursday, as “unacceptable in every way” and said it would use every legal step to defend itself.

The law firm, Jones Day, declined to comment. The Munich prosecutor’s office was not immediately available for comment.

Jones Day was searched on the same day as Volkswagen’s (VW) premium brand Audi’s headquarters were searched, in a sign prosecutors are stepping up efforts to find who was responsible for - and who may have known about - the biggest business crisis in the 80-year-old group’s history.

“In our opinion the search of a law firm mandated by a company contravenes the principles of the code of criminal procedure,” VW spokesman Eric Felber said in a statement.

While client attorney privilege is sacrosanct when there is a formal mandate, there is a gray area when a lawfirm is not formally tasked with representing a particular individual, according to law professor Werner Beulke said.

Jones Day was mandated by VW’s supervisory board to lead an open-ended investigation into an emissions test cheating scandal.

While in northern German Federal states, prosecutors are barred from searching lawfirms, there is no nationwide ruling on the matter from Germany’s Federal Court of Justice, leaving an opening for southern Bavarian prosecutors to search VW’s lawfirm, Beulke said.

VW has never published the full Jones Day report, although a summary of its findings was compiled in the form of a “Statement of facts” for the U.S. Department of Justice.

Jones Day found wrongdoing by certain high-level VW employees but exonerated members of the management board and Volkswagen used the findings to negotiate a $4.3 billion settlement with U.S. authorities.

VW has maintained that its executive board did not learn of the illegal emissions cheating devices installed in VW cars until late August 2015 and formally reported the cheating to U.S. authorities in early September that year.

In January, German prosecutors in Braunschweig widened their probe of VW, searched 28 premises, and raised the number of people under investigation to 37 from 21, including former Chief Executive Martin Winterkorn.

In February, a media report said former chairman Ferdinand Piech had informed top directors about potential cheating of diesel emission tests six months before the scandal became public. VW strongly denied this.

Reporting by Edward Taylor and Joern Poltz; Additional reporting by Joern Poltz, Irene Preisinger and Jan Schwartz; Editing by Christoph Steitz and Mark Potter