Lucille
09-27-2016, 07:56 AM
That's mighty big of them.
http://www.zerohedge.com/news/2016-09-27/doj-assessing-size-criminal-penalty-it-can-levy-volkswagen-without-putting-company-o
When two weeks ago the DOJ announced a far larger than expected $14 billion settlement demand from Deutsche Bank, one which if left unrevised would would leave Deutsche Bank short of billions in capital, has since triggered the latest episode of European bank selling and potential contagion, some wondered if there was an element of punitive retaliation aimed at Europe's "assault" on Apple's taxes. That question will surely grow louder when overnight Bloomberg reported that the DOJ is now assessing "how big a criminal fine it can extract from Volkswagen AG over emissions-cheating without putting the German carmaker out of business."
Volkswagen stock promptly dropped over 3% on the news and was down 2.5% as of the latest refresh.
The government and Volkswagen are trying to reach a settlement by January, Bloomberg reported, before a new U.S. administration comes into office and replaces the political appointees who have been overseeing the process. In criminal prosecutions, the Justice Department may assess the impact of a charge or settlement on a business’s viability, and the resulting effect on shareholders and employees. A prosecution’s potential collateral damage is one of the factors the department considers under principles for prosecuting businesses laid out in the “U.S. Attorney’s Manual.”
Bloomberg adds that while in the DB case the penalty may have been overly demanding, as the U.S.’s Volkswagen calculations show, the department is showing that in some cases, it will take a company’s financial health into account. That said, it’s not clear what penalty range the U.S. is considering in the criminal case against Volkswagen. The company had net liquidity of 28.8 billion euros ($32.4 billion) as of June 30, and Chief Financial Officer Frank Witter said his goal is to keep the target for average net liquidity at 20 billion euros to ensure funding needs and protect the company’s credit rating. The carmaker generates several billions of dollars of cash each quarter and could tap into a credit line or raise capital if necessary to pay its obligations.
Volkswagen has already agreed to pay an industry-record $16.5 billion in civil litigation fines in the U.S. after admitting last year that its diesel cars were outfitted with a “defeat device” that allowed them to game U.S. environmental tests. The carmaker is also on the hook for outstanding civil claims from several states and as much as $9.2 billion in investor lawsuits in Germany, where it’s also under criminal investigation.
“The department doesn’t pick a number in a complete vacuum," said William Stellmach, a former federal prosecutor now at Willkie Farr & Gallagher LLP in Washington. "There are a number of cases where it has acknowledged that the impact of a financial penalty on a company was a factor in deciding what that penalty should be.
[...]
Ultimately, however, the question remains: is the DOJ set out on a crusade to "punish" European some of the most iconic European -or rather German- companies, taking a shot first at Deutsche and now Volkswagen, and if so at what point will it deem its overreach to be sufficient. For now, there is no answer and as questions linger, expect European stocks to suffer for the near-future.
http://www.zerohedge.com/news/2016-09-27/doj-assessing-size-criminal-penalty-it-can-levy-volkswagen-without-putting-company-o
When two weeks ago the DOJ announced a far larger than expected $14 billion settlement demand from Deutsche Bank, one which if left unrevised would would leave Deutsche Bank short of billions in capital, has since triggered the latest episode of European bank selling and potential contagion, some wondered if there was an element of punitive retaliation aimed at Europe's "assault" on Apple's taxes. That question will surely grow louder when overnight Bloomberg reported that the DOJ is now assessing "how big a criminal fine it can extract from Volkswagen AG over emissions-cheating without putting the German carmaker out of business."
Volkswagen stock promptly dropped over 3% on the news and was down 2.5% as of the latest refresh.
The government and Volkswagen are trying to reach a settlement by January, Bloomberg reported, before a new U.S. administration comes into office and replaces the political appointees who have been overseeing the process. In criminal prosecutions, the Justice Department may assess the impact of a charge or settlement on a business’s viability, and the resulting effect on shareholders and employees. A prosecution’s potential collateral damage is one of the factors the department considers under principles for prosecuting businesses laid out in the “U.S. Attorney’s Manual.”
Bloomberg adds that while in the DB case the penalty may have been overly demanding, as the U.S.’s Volkswagen calculations show, the department is showing that in some cases, it will take a company’s financial health into account. That said, it’s not clear what penalty range the U.S. is considering in the criminal case against Volkswagen. The company had net liquidity of 28.8 billion euros ($32.4 billion) as of June 30, and Chief Financial Officer Frank Witter said his goal is to keep the target for average net liquidity at 20 billion euros to ensure funding needs and protect the company’s credit rating. The carmaker generates several billions of dollars of cash each quarter and could tap into a credit line or raise capital if necessary to pay its obligations.
Volkswagen has already agreed to pay an industry-record $16.5 billion in civil litigation fines in the U.S. after admitting last year that its diesel cars were outfitted with a “defeat device” that allowed them to game U.S. environmental tests. The carmaker is also on the hook for outstanding civil claims from several states and as much as $9.2 billion in investor lawsuits in Germany, where it’s also under criminal investigation.
“The department doesn’t pick a number in a complete vacuum," said William Stellmach, a former federal prosecutor now at Willkie Farr & Gallagher LLP in Washington. "There are a number of cases where it has acknowledged that the impact of a financial penalty on a company was a factor in deciding what that penalty should be.
[...]
Ultimately, however, the question remains: is the DOJ set out on a crusade to "punish" European some of the most iconic European -or rather German- companies, taking a shot first at Deutsche and now Volkswagen, and if so at what point will it deem its overreach to be sufficient. For now, there is no answer and as questions linger, expect European stocks to suffer for the near-future.