LDN - Business

Volkswagen and unions reject accusations over works council payments

[November 15, 2017]

FRANKFURT/BERLIN (Reuters) - Volkswagen <VOWG_p.DE> and its unions on Wednesday rebuffed accusations that the carmaker's top labor representative has been overpaid, seeking to calm the waves a day after prosecutors and tax investigators raided the offices of senior VW officials.

The latest troubles add to a string of legal battles more than two years into the VW diesel emissions scandal and only weeks after European Union and German antitrust officials had swooped on the company and rival carmakers over suspicions of collusion.

VW and the works council said in separate statements on Wednesday that payments to Bernd Osterloh, the carmaker's labor leader, were in line with legal guidelines. Osterloh's office was raided on Tuesday along with those of VW's finance chief and head of personnel.

Osterloh and fellow members of VW's supervisory board are due to meet on Friday to ratify management's spending plans for the next five years to further the company's aim of transforming itself into a world leader in green transport.

The raid by prosecutors and tax officers was related to suspected overpayment and related tax evasion, a person familiar with the matter said, referring to the potential for overpayment to result in higher operating expenses and the payment of too little tax.

But under Germany's corporate tax law, companies are entitled to declare only 50 percent of the remuneration of supervisory board members for tax purposes, a tax professor at Berlin's Free University said.

"It remains to be seen whether suspected tax fraud inspired this action," the professor said on condition of anonymity because of the sensitivity of the matter and declined to elaborate.

VW shares were down 0.8 percent at 154 euros by 1323 GMT.

"If wrongdoing is found we would expect most of the heat to fall on the individuals involved," said Evercore ISI analyst Arndt Ellinghorst, who has an "outperform" rating on the stock.

A spokesman for Braunschweig prosecutors said the raids included the seizure of potential evidence but declined to comment on the reason for the searches and the individuals targeted.

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Bernd Osterloh, head of Volkwagen's works council, addresses a news conference at the company's headquarters in Wolfburg, Germany October 6, 2015. REUTERS/Hannibal Hanschke

The office of VW chairman Hans Dieter Poetsch, who in his capacity as CEO of VW's majority shareholder Porsche SE <PSHG_p.DE> has been investigated by Stuttgart prosecutors for suspected violation of disclosure rules, was not searched, a spokesman said on Wednesday, revising comments made late on Tuesday.

Both Volkswagen and the works council said they are confident that Osterloh's remuneration would be found to be compliant with the law.

Requests by Reuters to speak with Osterloh, VW group finance chief Frank Witter and human resources chief Karlheinz Blessing were not answered.

The works council added that Osterloh himself was not the target of the investigation, but a public debate about his pay could be damaging when he seeks re-election as works council chairman next March, analysts said.

It was revealed in May that German prosecutors were investigating current and former executives at VW on suspicion that they paid Osterloh an excessive salary.

Osterloh told a newspaper at the time that his basic pay was about 200,000 euros ($237,000) and that bonuses had lifted it to a peak of 750,000 euros in one year.

In Germany, wasting corporate funds can be an illegal breach of fiduciary duty.

($1 = 0.8445 euros)

(Reporting by Tom Sims and Andreas Cremer; Editing by David Goodman; Editing by Georgina Prodhan and David Goodman)

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