YOU ARE HERE: LAT HomeCollections

VW Fears It Was Defrauded of $266 Million

March 11, 1987|From Times Wire Services

WOLFSBURG, West Germany — West German auto maker Volkswagen AG said it may have lost up to $266 million through possibly illegal foreign exchange dealings.

"Strong suspicions have emerged of punishable acts in connection with currency transactions of Volkswagen AG to the detriment of the company," spokesman Ortwin Witzel said in a statement Tuesday. Although reserves will have to be set aside to cover the possible losses, Witzel said Volkswagen's 1986 earnings will match its 1985 results. Net income totaled $256 million in 1985.

Volkswagen has asked the nearby Braunschweig district attorney's office to investigate possible fraud, misrepresentation and forgery charges in connection with the transactions, Witzel said.

Others Not Named

He said the dealings may involve members of Volkswagen's management and people outside the company. He did not elaborate in the statement, which was distributed to the news media.

Witzel did not say which other companies may have been involved in the transactions.

The losses surfaced when company auditors discovered that documents supposedly hedging part of Volkswagen's huge foreign income against a drop in the value of the dollar may have been forged, Witzel added.

Those transactions must be regarded as open, and the company must assume any resulting foreign exchange loss, Witzel said.

Occurred Some Time Ago

Companies with large foreign earnings frequently protect that income by buying currency futures contracts guaranteeing a specific exchange rate at a future date.

Witzel also said that the transaction probably occurred as long as two years ago. He could not say how much money was involved but said a certain amount of dollars had been bought and then sold forward.

The prosecutor's office was closed for the day and could not be reached for immediate comment.

Los Angeles Times Articles