Litigating on multiple fronts is a time-honored strategy, but this case pushes the limit.

It starts with a dispute that—and I speak here in my professional capacity as a legal news editor—is of zero interest to the American public. VW subsidiary Skoda and its former dealer in Egypt, Artoc Auto and its owner Shafik Gabr, had a falling-out over renewing their contract.

I almost fell asleep typing that sentence is how much I care about who the Skoda dealer is in Egypt, how much they're paid, whether they have exclusive rights, or even if a local Skoda manager might once have demanded a kickback.

And yet … this fight has allegedly spilled into the halls of Congress—at least indirectly. Not only that, it involves star lawyers lobbying on behalf of Artoc including Covington & Burling's vice chair Lanny Breuer, who formerly headed the Justice Department's criminal division, and Stuart Eizenstat, who leads the firm's international practice and previously served as ambassador to the European Union.

On the other side is VW's go-to lawyer, Robert Giuffra of Sullivan & Cromwell, a star in his own right.

What the heck is going on? Skodas aren't even sold in the United States.

It's a bit hard to untangle, and a Covington spokesman did not respond to my request for comment. But Giuffra in a July 2 letter obtained by Lit Daily makes a big claim: Gabr and Artoc are trying to “misuse members of Congress to exert pressure on Volkswagen to settle a commercial dispute in Egypt for an unreasonable amount.”

It is “a campaign of misinformation that is funded and directed by a non-U.S. national, related to events with no connection to the United States and aimed at causing Volkswagen harm as a result of a commercial dispute in Egypt,” he wrote to members of the House committee on Space, Science and Technology.

Gabr and Artoc Auto—part of the Artoc Group for Investment and Development—have multiple lawsuits pending in Egypt over the Skoda conflict. They allegedly want $225 million in damages stemming from the loss of Skoda dealership rights.

The usual move would be to let the litigation run its course. But if VW is right, Artoc is thinking waaay outside that box.

To hear Giuffra tell it, the spurned auto dealer is now lobbying members of Congress—with some success—to hold hearings probing VW's ethics and compliance with the diesel emissions settlement in a bid to score additional leverage in the Skoda fight unfolding 5,800 miles away.

First of all: Wow.

Second: Is this even plausible?

Gabr and Artoc say no way.

In an emailed statement, Artoc said: “Mr. M. Shafik Gabr completely rejects allegations by German VW Group of 'manipulating actions in Congress against Volkswagen.'”

Artoc called it “an obvious attempt designed to deflect from [VW's] criminal conduct in the context of dieselgate and beyond.”

Maybe. But here are some other things we know.

In their lobbying registration, the Covington team—which also includes the chair of the firm's global anti-corruption practice group Donald Ridings, partner Arlo Devlin-Brown and senior international advisor Anne Pence—describe what they've been hired by Artoc to do: “Strategic advice on commercial dispute between Artoc and VW corporation related to automobile dealership in Egypt.”

That seems inconsistent with Artoc's denial. (If the Covington crew was providing strictly legal advice, there would be no need for a lobbying registration.)

Artoc has also hired Holland & Knight partner Richard Gold, the leader of the firm's public policy and regulation group, and senior policy advisor Scott Mason, who was one of the original members of Donald Trump's Washington campaign team.

In their lobbying registration, the Holland & Knight duo describe their task for Artoc as “Education on Clean Air Act enforcement issues.”

So…why would a company headquartered in Cairo hire lobbyists to educate members of Congress on Clean Air Act enforcement? Somehow I doubt they're just concerned about the environment.

Maybe because it's a way to go after VW. After all, the German automaker has shelled out $23 billion to settle consumer, federal and state lawsuits stemming from the diesel emissions scandal, and is on probation for three years with the Department of Justice as part of its criminal plea.

It appears some members of Congress have responded.

Texas Republican Lamar Smith, who chairs the House Committee on Science, Space and Technology, and Rep. Dana Rohrabacher (R- California) wrote to VW CEO Herbert Diess on June 14 that their committee “intends to hold a hearing to examine the use of advanced technologies to circumvent regulations.”

“Recent reports and law enforcement action against VW indicate that there could still be potential issues within the company that would be of concern to the U.S. government,” they wrote. “VW continues to operate under a cloud.”

An earlier (unsigned) letter to VW on Rohrabacker's letterhead from 10 House members mentions Egypt and Skoda specifically.

“A bribery scheme detected in Egypt led to the termination of a longstanding agency agreement for Skoda vehicles,” they wrote on Dec. 14, 2017, pointing to it as an example of VW's “compliance and ethical issues we find deeply troubling.” They also flag the (unsubstantiated) bribery allegations as “a fact potentially relevant under the Foreign Corrupt Practices Act.”

That sounds ominous—except the FCPA targets corruption involving government officials. Per Artoc, that's not what happened here.

“There is indeed a dispute between ARTOC Auto and VW/Skoda,” Artoc said in its emailed press statement, which is dated July 5. “In 2017, this dispute emerged due to the fact that ARTOC Auto refused to pay bribe money requested by Mr. Milan Zinke. Mr Zinke was Senior Executive in charge of the Middle East in VW/Skoda…Upon ARTOC's refusal to pay the requested bribe and despite repeatedly bringing the matter to the attention of VW senior executives in Wolfsburg (ARTOC Auto having taped conversations and emails) and Prague, VW chose to terminate the relationship without cause. This was despite a 24-year relationship with ARTOC Auto, who took Skoda from zero market share to number one European car in Egypt.”

It's easy to see why Artoc has a dispute with VW—even as VW vigorously contests their version of the facts. But what's not clear is why Congress should care.

 

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