Business & Real Estate

CalSTRS steps up pressure in Volkswagen diesel scandal

California’s $188 billion teachers’ pension fund is stepping up the pressure on Volkswagen in a European lawsuit over the German automaker’s air-pollution scandal.

The California State Teachers’ Retirement System, the second-largest U.S. public pension fund, has obtained a court order that will enable its attorneys to unearth potentially crucial corporate records relating to Volkswagen’s tainted diesel vehicles.

The order came a month after CalSTRS joined other institutional shareholders in suing Volkswagen in Germany, claiming their investments in the company have been damaged by its diesel pollution scandal. CalSTRS’ shares of Volkswagen were worth $52 million as of Dec. 31.

German law doesn’t permit plaintiffs to rummage through a defendant’s internal records, a process known as pretrial discovery. American law gives plaintiffs that right.

Last week, CalSTRS persuaded a federal judge in New Jersey, where Volkswagen’s American subsidiary is incorporated, to grant permission for the pension fund to slap the subsidiary with a subpoena demanding access to a broad array of documents on Volkswagen diesel technology.

“There is strong reason to believe that (the U.S. subsidiary) has the requested documents in its custody and control, here in the United States,” CalSTRS’ lawyers argued. The documents would be then used in pursuing the German lawsuit.

Volkswagen’s stock price has fallen about 20 percent since the scandal was revealed.

The lawsuit in Germany is further evidence that Volkswagen’s legal problems are far from over, even after the carmaker entered into a $14.7 billion settlement last month with federal and state regulators. The settlement includes a plan to buy back or fix half a million cars.

More than $1.1 billion of the settlement will go to California, where engineers at the California Air Resources Board were instrumental in uncovering the emissions scandal.

Air board engineers, following up on research by West Virginia University, discovered that Volkswagen had equipped its diesel cars with “defeat device” software that switched on pollution controls when the vehicles underwent emissions testing. The software turned off the controls, which can hurt performance and fuel mileage, when the cars went on the road.

The $14.7 billion settlement only covers 2-liter engine vehicles. The California air board and the U.S. Environmental Protection Agency have rejected Volkswagen’s proposal for recalling the pricier 3-liter vehicles.

Dale Kasler: 916-321-1066, @dakasler