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Chief Financial Officer Resigns Following Fraud Investigation

March 16, 1987

BONN, West Germany (AP) _ The chief financial officer of Volkswagen AG has resigned following an investigation of charges that fraudulent foreign exchange deals cost the automaker millions of dollars.

The officer, Rolf Selowsky, 56, resigned Saturday at the request of the company’s supervisory board, company spokesman Ortwin Witzel said in an interview on Sunday.

Volkswagen announced last week it had lost up to $258 million in possibly fraudulent foreign exchange deals and filed a criminal complaint against people unknown for fraud, breach of trust and forgery.

Federal and state investigators are looking into the case.

Burkhard Junger, the company’s chief of foreign exchange trading, was fired Friday, and six other corporate financial officers were fired or suspended.

The news magazine Der Spiegel on Sunday quoted Junger as saying he was ″completely innocent.″

Volkswagen spokesman Peter Schlelein has said Junger was fired because of ″principle differences of opinion″ regarding foreign exchange deals and not because of allegations of fraud.

The allegedly fraudulent foreign exchange deals involve falsification of so-called forward contracts in which parties agree to buy and sell currency at a certain rate in the future.

Such contracts are often used by companies with heavy foreign trade to protect themselves against fluctuations in the value of foreign currencies.

Volkswagen said it lost $258 million through possibly fraudulent transactions involving such contracts, surpassing Volkswagen’s 1985 profits of $257.7 million.

Der Spiegel cited a Feb. 18 exchange between Volkswagen and the Hungarian National Bank as an example of how the allegedly fraudulent foreign exchange deals were discovered by company auditors.

The magazine said that on that day, Volkswagen tried to act on a forward contract with the Hungarian bank that was listed in the company’s books as being due.

When Volkswagen officials contacted the bank, they were told no such contract existed, the magazine said.

Der Spiegel did not say how much money was involved in that transaction or give further details.

Carl Hahn, Volkswagen’s board chairman, said in an interview with Stern magazine, another West German weekly, that he believed people outside the company mainly were responsible for the allegedly fraudulent exchange deals.

Volkswagen, one of the worlds largest car makers, produced 2.4 million vehicles in 1985 and an estimated 2.5 million in 1986. It sells an average 300,000 cars in the United States each year.

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