United States Securities and Exchange Commission v. Aktiengesellschaft

Background

The Securities and Exchange Commission brought a civil enforcement action in 2019 alleging that the defendant, among others, carried out a large fraud that misled United States investors, consumers, and regulators in connection with the sale of purportedly “clean diesel” cars and billions of dollars of corporate bonds. The SEC alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. It sought a permanent injunction, repayment of funds with interest, and civil penalties.

The opinion identifies the settling defendant as Volkswagen Group of America Finance, LLC. In February 2024, that defendant agreed to settle the SEC’s charges without admitting or denying the allegations in the amended complaint. The parties jointly requested entry of the proposed final judgment.

Proposed judgment

The proposed final judgment would permanently enjoin the defendant from future violations of Section 10(b) of the Securities Exchange Act and Section 17(a) of the Securities Act. It would also require the defendant to pay $34,350,000 in disgorgement and $14,400,000 in prejudgment interest. The payments would go into a segregated fund established by the SEC for distribution to affected investors subject to the court’s approval. The defendant waived its right to appeal.

The opinion states that the proposed judgment, together with a later stipulation, would fully resolve the SEC’s claims against all defendants in the lawsuit involving three bond offerings in 2014 and 2015.

Court’s analysis

The court explained that an SEC settlement may be approved unless the consent decree is unfair, inadequate, or unreasonable. It considered both procedural fairness and substantive fairness. The court found that the parties were represented by counsel, engaged in years of discovery and arm’s-length negotiations, and reached a good-faith compromise of contested claims. It therefore found no procedural unfairness.

The court also found the proposed judgment substantively fair, adequate, and reasonable. It determined that the injunction, disgorgement, and prejudgment-interest provisions were lawful remedies; that the judgment’s terms, payment process, and enforcement mechanism were clear; that it resolved the claims in the complaint; and that there was no indication of improper collusion or corruption. The court also found the result to be in the public interest because it secured injunctive and monetary relief for affected investors without the time and expense of a trial.

Disposition

Judge Charles R. Breyer GRANTED the parties’ agreed motion for entry of final judgment. The court stated that it would issue an order entering the proposed final judgment.