In an article published on May 7 in Law360, Tom Potter provides insight on The U.S. Securities and Exchange Commission's allegations that Volkswagen fraudulently raised billions of dollars through bonds while failing to mention that scores of its vehicles flouted emissions standards.

The SEC alleged in March that U.S. investors were duped when Volkswagen issued more than $13 billion in bonds and asset-backed securities in 2014 and 2015, a blunt reminder that the auto giant hasn't insulated itself from enforcement actions related to the emissions scandal despite already paying out billions of dollars in penalties and settlements with the U.S. government more than two years ago.

Experts say the case underscores that companies must carefully negotiate resolutions with the government for operational and compliance failings or face the sting of the SEC's aggressive enforcement stance.

Some attorneys define this case as unusual, as it raises questions on what new evidence the SEC might have to back its claims that Volkswagen misled U.S. investors into buying so-called 144A bonds and asset-backed securities at inflated prices based on the company's and executives' statements in bond-offering documents.

However, others say that for the SEC, it's black and white: If you didn't disclose something that you knew would be relevant to institutional investors, you're in trouble.

"It's not just, 'Hey, you had these defeat devices and you cheated the environmental regulations and that's fraud,' but more, 'At the same time you were issuing securities, you knew this existed and yet you didn't disclose it in the offering documents,'" stated Potter.

He further explained that for Volkswagen, it might seem like the SEC is "busting its chops" about not putting a specific disclosure in the bond offering documents that nobody cared about. But for the SEC, the suit may have "significance beyond normal SEC disclosure actions" in that it pushes for more self-reporting of misdeeds early on.

“Volkswagen might have a better chance at mounting a stout defense with a dismissal motion loaded with public relations criticism about government piling on, and then negotiating a relatively quick settlement that doesn't add materially to the existing settlement amounts it already paid,” detailed Potter.

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