CalSTRS Joins Scores of Institutional Investors in Filing German Securities Litigation Against Volkswagen AG
VW’s purposeful deception in defeating air quality controls on millions of diesel vehicles polluted the environment; and threatens the company’s long-term shareholder value.
WEST SACRAMENTO, Calif. – The California State Teachers’ Retirement System retained the services of the foreign litigation finance group, Bentham Europe, and the international law firm, Quinn Emanuel, which yesterday filed the first of two suits in Germany against Volkswagen AG on behalf of hundreds of institutional funds. The total value of the claims filed yesterday is very significant indeed with shareholders having collectively lost many hundreds of millions of euros, citing the automaker’s admission that it deliberately installed software that misrepresented air quality and emissions information on millions of so-called “clean diesel” vehicles.
According to a portion of the press release issued today by Bentham Europe and Quinn Emanuel: “The shareholders’ claims relate directly to the material share price fall experienced by Volkswagen AG in the week commencing Monday 21 September 2015, upon its disclosure of a long-running practice of installing ‘defeat device’ software in its diesel-powered vehicles exposing the company to substantial fines in the United States and elsewhere. The shareholders represent a true cross section of the investor base of Volkswagen AG, from sovereign wealth funds and international asset managers on the one hand to significant public pension funds, multinational company pension plans and foundations on the other. In addition to the funds that are currently participating, Bentham Europe is in discussions with a very large number of additional funds and international asset managers. In total, the expectation is that the claims to be advanced by the whole group will ultimately run into the billions of euros. Bentham will issue a further press release when the second suit is filed in Germany.”
This securities litigation against Volkswagen directly aligns with CalSTRS’ fiduciary goal of recovering losses that amount to millions of dollars caused by corporate wrongdoing. Since the September 2015 revelation of Volkswagen’s fraudulent activities, illegal and intentional wrongdoing to manipulate emissions testing, VW’s share price has dropped significantly. The litigation is currently in the planning process, with additional plaintiffs to be announced in the near future.
“Volkswagen’s actions are particularly heinous, since the company marketed itself as a forward thinking steward of the environment,” said CalSTRS Chief Executive Officer Jack Ehnes.
“Its deceitful and hypocritical actions ultimately caused great harm to the atmosphere and the emissions cheating scandal has badly hurt the company’s value. In addition to our fiduciary goal of recovering losses, CalSTRS also places utmost importance on communicating a clear message to VW, as well as the entire automotive industry, that we will not tolerate these illegal actions.”
Additionally, Brian J. Bartow CalSTRS General Counsel and Chief Compliance Officer commented, “Companies must be held accountable when they engage in such widespread deliberate deceit which destroys shareholder value, damages their reputation and harms the public. As a long-term shareholder, CalSTRS has serious concerns about VW’s internal controls, governance and oversight by the board. This action seeks to recover not only CalSTRS economic losses to the pension fund, but, ultimately, to implement much needed corporate governance reforms going forward at VW.”
German securities litigation is unlike United States securities class actions because shareholders in German companies are not entitled to a pro-rata share of recovery unless they affirmatively join a case, as CalSTRS is doing. A majority of CalSTRS shares in Volkswagen AG, valued at $52 million (353,988 shares as of December 31, 2015) in common and preferred stock were purchased on foreign exchanges.
The California State Teachers’ Retirement System, with a portfolio valued at $188.8 billion as of May 31, 2016, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California’s 896,000 public school educators and their families from the state’s 1,700 school districts, county offices of education and community college districts.