German prosecutors probe bonus payments to suspended VW manager

FRANKFURT (Reuters) - German prosecutors are investigating a possible breach of fiduciary duty by Volkswagen over bonus payments made to an executive who was suspended over the carmaker’s emissions cheating scandal.

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Regulators blew the whistle on Volkswagen (VW) in 2015 after the German company was caught using software designed to cheat emissions tests on diesel engines.

VW has argued the cheating was the work of a handful of engineers who acted without the consent or knowledge of members of the management board, which at the time included VW’s current chief executive Herbert Diess and chairman Hans-Dieter Poetsch.

Prosecutors in Braunschweig, in VW’s home region of Lower Saxony, said on Tuesday they were now investigating why one VW manager received bonus payments while suspended. According to German paper Bild am Sonntag, the manager received 866,000 euros ($974,000) in bonuses between 2016 and 2018.

The prosecutors declined to identify the manager.

VW declined to comment on the payments.

The manager is among five VW executives, including former chief executive Martin Winterkorn, to face criminal charges for conspiring to cover up the carmaker’s diesel emissions cheating scandal.

Prosecutors have said that between November 2006 and September 2015, Winterkorn and four other managers failed in their duty to inform authorities about systematic emissions cheating. The VW managers could face up to 10 years in prison.

The carmaker has argued that although it was informed about the use of software to help pass emissions tests, lawyers advising the company had cautioned against informing the authorities because it was unclear the software was illegal.

Regulators later said that VW had crossed the line from using legitimate software programs to protect engines from damage, known as Auxiliary Emission Control Devices (AECD), to using an illegal “defeat device” which the U.S. Environmental Protection Agency (EPA) defines as software which “reduced the effectiveness of the emission control system.”

VW has said it also stopped short of informing shareholders about the software before the regulatory announcement because it felt potential fines would not exceed 150 million euros. So far the scandal has cost VW more than 29 billion euros.

Reporting by Jan Schwartz; Writing by Edward Taylor; Editing by Mark Potter