December 7, 2016 / 3:23 AM / 9 months ago

South Korea to slap VW with record fine, pursue executives over emissions ads

Volkswagen cars are parked at a dealership in Seoul, South Korea, August 2, 2016.Kim Hong-Ji

SEOUL (Reuters) - South Korea said it will file criminal complaints against five former and current executives at Volkswagen AG's (VOWG_p.DE) South Korean unit and fine the company a record 37.3 billion won (25.2 million pounds) for false advertising on vehicle emissions.

The fine, a record for false advertising in the Asian country, indicates South Korean authorities are in no mood to soften their tough line on the German carmaker's emissions-test cheating, having already suspended most of its sales in the country since August.

The Fair Trade Commission (FTC) said on Wednesday it would ask prosecutors to investigate Volkswagen's headquarters, its South Korean unit and five former and current executives including André Konsbruck, currently vice president of sales for the Americas at Volkswagen unit Audi, and Audi's Head of Sales Overseas Terence Bryce Johnsson.

It alleged Volkswagen made "false, exaggerated or deceptive" claims in the advertisements, with punishments ranging from jail terms of up to two years or fines of up to 150 million won, an FTC official told reporters.

Volkswagen advertised its cars as environmentally friendly vehicles that met pollution standards although they were equipped with devices designed to deceive government tests, the regulator said.

Audi Volkswagen Korea (AVK) said it had not been formally notified of the regulator's decision.

"AVK is committed to rebuilding trust with the authorities and with customers and other stakeholders in Korea," it said in a statement.

South Korea has already fined Volkswagen 17.8 billion won for emissions-cheating, and arrested one local Volkswagen executive on accusations including fabrication of documents and violation air quality laws.

The sales suspension imposed in August slammed the brakes on the German automaker's breakneck growth in South Korea, a market dominated by homegrown rivals like Hyundai Motor (005380.KS) and Kia Motors (000270.KS).

While South Korea is a relatively small market for Volkswagen, it is significant for its luxury marques Audi and Bentley and one of the fastest-growing markets for all brands.

Volkswagen admitted in September 2015 to using software to falsify pollution tests on some diesel cars, spurring legal action in the United States, Germany, South Korea and elsewhere.

In the United States, Volkswagen has already agreed to spend up to $16.5 billion to date to resolve diesel emissions cheating allegations, and still may face billions more in fines.

Reporting by Hyunjoo Jin; Editing by Stephen Coates

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