Dusseldorf The Hanover public prosecutor’s office is targeting the former top management of Continental in the diesel scandal. A spokesman confirmed to the Handelsblatt on Thursday that five people are being investigated. Among them are the long-time CEO Elmar Degenhart, the recently retired CFO Wolfgang Schäfer and ex-Powertrain board member José Avila.
The allegations are tough: aiding and abetting fraud, breach of trust and willful violation of supervisory duties. On Wednesday, documents and data were secured in the law firm Noerr, which Continental had commissioned to investigate the allegations. Immediately afterwards, the automotive supplier called an extraordinary supervisory board meeting at short notice, in which Schäfer was released from his duties as chief financial officer and responsible for the compliance department with immediate effect.
Schäfer’s resignation “is in connection with the already known investigations of the Hanover public prosecutor’s office into the use of illegal defeat devices in diesel engines and deficits in the ongoing investigation at Continental,” said the company. Investors reacted with uncertainty. On Thursday, the Dax Group’s papers temporarily lost more than four percent.
In the group itself, the expansion of the investigation is causing an uproar. Many employees have already been “shaken” by the sudden departure of Schäfer, it is said from those around the company. The fact that Degenhart is now being investigated also weighed on the mood on Thursday.
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The extended investigations hit Continental at a time when management actually has to deal intensively with building up the software business and dealing with the ongoing chip crisis. From the group it is therefore said that they want to find a successor for Schäfer quickly.
Especially with the departure of Schäfer, the management team will be weakened in a phase of great challenges, according to the employee environment. For CEO Nikolai Setzer it is now a “special kind of trial by fire”. For almost a year in office, Setzer has been responsible for the core business on an interim basis, after the supervisory board had decided on the departures of the two automotive board members Helmut Matschi and Frank Jourdan.
Now the 50-year-old is also making the investigation of the diesel investigation a top priority. “With immediate effect, we will make the Group Compliance and Group Law and Intellectual Property divisions subject to my direct responsibility and fill them again below board level,” Setzer announced.
Internal investigation report in focus
The first two allegations – aiding and abetting fraud and breach of trust – are potential criminal offenses. The violation of the duty of supervision is considered an administrative offense. This can lead to legal proceedings against the company itself. The public prosecutor’s office can then impose fines and skim off the profits made from illegal transactions. The car manufacturers Volkswagen, Audi, Porsche and Daimler have also had to make such payments in the diesel scandal – often high three-digit million amounts.
In the Continental case, there had already been several searches. “We now have 61 suspects in the process,” said Eisenhauer. In the course of the investigation, the analysis of the data and documents resulted in new findings.
A point has now been reached at which one can name the names of high-ranking managers. For tactical reasons of investigation, it has so far been refrained from. According to earlier statements, the investigation concerned a 1.6-liter diesel engine developed by VW, for which Continental had supplied the engine management system.
After the VW diesel scandal became known in 2015, the auto supplier had an internal investigation report drawn up. Both the compliance department, which was the responsibility of CFO Schäfer, and external law firms had worked on this. Hundreds of thousands of emails were evaluated. The result at the time: Continental was not guilty of anything. The company had referred to it again and again
The documents that the law firm handed over to the Hanover public prosecutor’s office on Wednesday allow a different conclusion. Apparently the report shows severe shortcomings. According to information from the Handelsblatt, there were considerable problems with the internal processing and defense of the company by the commercial law firm Noerr.
Both the investigators and the group are said to have been dissatisfied with the work of the law firm. “The public prosecutor’s office has massively criticized Noerr’s work,” says a lawyer.
Schäfer is said not to have questioned the results of the report
This so-called “Lupus report”, which the law firm prepared and accompanied its own compliance department, has now evidently become the undoing of Schäfer. The manager, who has been on the Continental Executive Board since 2010, is said not to have questioned the results.
The public prosecutor’s office therefore accuses the top management of not paying the necessary attention to the report. She now has to investigate the allegations, what the former top managers knew and whether Degenhart, Schäfer and Avila may have actively intervened in the preparation of the investigation report. It is unclear whether the internal investigation was actively delayed as a result.
In the meantime, Continental has reacted and largely parted ways with Noerr. The Executive Board of Continental is now working with the law firm Ufer Knauer, the split-off company Vitesco relies on defense attorney Alfred Dierlamm. The Continental Supervisory Board has also mandated the US law firm Skadden Arps.
The chairman of the supervisory board, Wolfgang Reitzle, said on Wednesday that they wanted to resolutely and fully clarify the matter at hand and that they were cooperating wholeheartedly with the public prosecutor’s office. “In accordance with our zero tolerance philosophy, we investigate every suspicion,” said Reitzle. The investigation report was prepared during his time as chairman of the supervisory board.
The investigation is causing concern among the workforce. After staff reduction measures, pandemic, plant closings, short-time work and the chip crisis, the news is another low blow, according to workers. With CEO Setzer and HR Director Ariane Reinhart, the supplier is only entering the year 2022 with two long-standing board members.
Legal and compliance departments are separated
It is noticeable that there is no word of thanks for Schäfer in the group’s announcement. Setzer’s words do not make the 62-year-old appear in a good light. “Integrity is an integral part of our corporate culture and anchored in our code of conduct that applies worldwide and for all Continental companies. Because we win with fair means, ”said Setzer.
Those in the know about the company are surprised by this harsh formulation. “I know Mr. Schäfer as a particularly honest, fair and, above all, very meticulous manager when it comes to legal issues,” says an insider.
Together with Schäfer, Christian zur Nedden, who is responsible for the legal department, compliance organization and IT issues, is also giving up his post. The departments will also be separated.
More: Prosecutor extends diesel investigation against Continental