VW execs investigated by German court for overpaying union chiefs

FRANKFURT -- A German court on Tuesday said it had opened proceedings against current and former Volkswagen Group managers, including management board members, on suspicion of breaching their fiduciary duties by awarding excessive pay to labor leaders.

In Germany, wasting corporate funds is legally a breach of fiduciary duty.

A regional court in Brunswick, Lower Saxony, where VW is based, said it had opened proceedings at the behest of local prosecutors in Brunswick.

Two former VW management board members as well as the current and former manager in charge of personnel are being probed for potential breach of their fiduciary duties, the court said in a statement.

Those being probed were responsible for setting pay and bonus payments for works council members, the court said, adding that prosecutors believed VW likely wasted more than 5 million euros ($5.86 million) in excessive pay for labor leaders between May 2011 and May 2016.

VW and the works council have said that payments were in line with legal guidelines.

On Tuesday, the automaker said it saw no wrongdoing in the way executives awarded pay and bonuses for works council members and said the hearings were an opportunity to clarify legal questions about how pay was awarded. VW said the company itself was not under investigation.

In 2017 the automaker said it had cut the salaries and suspended the bonuses of 14 members of its works council, including the council's head, Bernd Osterloh, as public prosecutors investigate alleged earlier overpayment.

At the time, Matthias Mueller, the former VW CEO, said that the cuts in pay were a precautionary measure taken until the legality of pay levels were clarified.

In November 2016, prosecutors and tax investigators raided the offices of senior VW officials probing overpayment and tax evasion.