This Bizarre Beef Is The Real Story Behind Those Anti-Volkswagen Political Attack Ads (UPDATED)

You might remember last month we wrote about a strange political ad that was making the rounds suggesting German Chancellor Angela Merkel thought Americans were "suckers" and that Germany (and especially Volkswagen) was planning to "dump cheap cars" on the U.S. market. Something about the ad just seemed strange, aside from the odd way it was misrepresenting the facts. We never did quite figure out the purpose of the ad, though now we have a possible explanation, and it involves Egypt, Skodas, and possibly very little to do with America.

The ad alleges that the German government was implicit in the Volkswagen Dieselgate scandal, and that Volkswagen is planning on "dumping" hundreds of thousands of cheap, supposedly repaired used diesel cars into the U.S. market to harm American auto sales. Here, just watch it:

The problem is that suggesting Volkswagen and the German government had this grand scam planned to dump cheap German cars into the market is just absurd. Yes, VW has a lot of 2009-2015 TDI cars that have been fixed via an officially approved procedure, and yes, VW can legally sell those cars, but that's by no means "dumping" cars on the market, and it's all completely within the scope of Volkswagen's settlement.

The alarmist, anti-German and sycophantically pro-Trump tone of the ad suggested it was produced by some right-wing group, and the organization that produced the ad, CASE for Consumers, does appear to be right-leaning despite their claims of non-partisanship. Which, whatever. But the story gets weirder than that.

Statements in an article provided by the president of the group, Matthew Kandrach, gave a strangely vague goal for what the group was seeking to achieve:

"But given its recent track record, ongoing legal issues and refusal to come clean on its current practices, maybe it's time we hit the brakes on that idea until we get some real answers, and VW stops acting like it has something to hide."

So, clearly this group is gunning for VW. And yes, VW did plenty of terrible things, and all of the considerable consequences they're dealing with as a result, including the criminal prosecution of their then-CEO, are all quite richly deserved.

But why, specifically, does this group have such a beef with Volkswagen?

The answer may be in this page on another website, www.holdvwaccountable.com. Hold Volkswagen Accountable isn't immediately affiliated with CASE for Consumers, but its tone and goals are remarkably similar.

On their "MORE EVIDENCE OF CORRUPTION AT VW" page, we see six paragraphs about major VW scandals, including a lascivious scandal with prostitutes from over ten years ago to recalls in China to alleged collusion.

But there's one scandal listed on there that seems sort of out of place. It feels far too regional and specific, too small in relation to the other massive scandals being reported about. It has to do with Skoda sales in Egypt, of all places and things.

Here's what it says:

"SKODA'S EGYPTIAN SCANDAL"

Skoda is a Czech subsidiary of Volkswagen. For over 20 years, the Artoc Group served as the sole distributor of Skoda's vehicles in Egypt. After a Skoda manager demanded a kickback from Artoc, Artoc reported the demand for a bribe to Volkswagen. But instead of removing the manager, Volkswagen and Skoda punished the whistleblower by taking away Artoc's exclusive distribution rights.

The German newsmagazine Der Spiegel reported on the scandal in April of last year and asked, "Is this now the next scandal in the long list of embarrassments for Volkswagen?"

That's clearly not Dieselgate. Most American car buyers have no idea what a Skoda is, let alone if the VW Group makes them. And by far, the vast majority of them do not care, not even a little. But it is something, and it might possibly be the something that's the real motivation behind all these videos and websites.

That "Egyptian Scandal" revolves around one very prominent Egyptian businessman, Shafik Gabr. Gabr is one of the richest men in Africa, and started a conglomerate named the ARTOC Group tht once had the exclusive right to sell Skodas—one of the car brands of the Volkswagen Group—in Egypt.

Gabr no longer has the right to sell Skodas, though, and there's some suggestion that this is the fundamental motivation behind these anti-German and anti-Volkswagen ad campaigns and websites.

The split between the ARTOC Group, which had been selling Skodas in Egypt for more than 20 years, and Volkswagen happened last year, and it was not a harmonious parting of ways. After the VW Group confirmed ARTOC's contracts would not be renewed, ARTOC made allegations that Skoda employees attempted to get kickback payments from ARTOC, though nothing has been proven so far.

According to a letter from Volkswagen's chief external U.S. lawyer, Robert J. Giuffra Jr., to U.S. Reps Lamar Smith and Dana Rohrabacher of the House Committee on Science, Space, and Technology obtained by Jalopnik, Volkswagen believes that the campaign (which includes the car-dumping video above) is not primarily concerned with the repercussions and future of the Dieselgate scandal, but rather is an attempt by ARTOC to have Volkswagen pay a large sum of money to settle the Skoda distribution dispute in Egypt. From the letter:

"As discussed during our meeting with the Committee's staff on May 10, 2018, we are concerned that the Committee's interest in Volkswagen is the result of a campaign by a non-U.S. national to try to pressure the company into paying him an unreasonable amount to settle a commercial dispute in Egypt that he has with Skoda, a Volkswagen subsidiary.

The foreign national, Mohamed Shafik Gabr, is the chairman and managing director of the ARTOC Group for Investment and Development, a private conglomerate that was Skoda's longstanding distribution partner in Egypt until late 2016, when Skoda ended the relationship after providing proper notice of termination because ARTOC would not sign a standard importer agreement.

In response, M. Gabr has not only sued Skoda in Egypt, but he has retained three U.S. lobbying firms, Covington & Burling LLP, Holland & Knight LLP, and Ballard Partners, to try to influence members of Congress and the media, both directly and through a series of misleading online op-ed articles and television ads."

One email to Volkswagen referenced in the letter suggested that the dispute "can all go away" if VW settles, and asks if "all this is needed or can this file be closed and all settled," in reference to potential congressional investigations into Volkswagen.

At least one email given to by Jalopnik by a source familiar with the matter was sent from a person with an Artocgroup.com email address to Volkswagen's general counsel and other ranking members of Volkswagen's board, recapping the Dieselgate scandals and alleging corrupt behavior regarding Skoda's Egyptian distributor, which, though not specifically named in the email, was ARTOC.

We have reached out for comment to the ARTOC Group and CASE for Consumers for comment. Gerry Scimeca, the vice president of the organization, spoke with me on the phone and refused to answer if the group was working with ARTOC. He instead just did a lot of pausing and cited CASE for Consumer's policy to not reveal their clients. He reminded me of this several times.

We've yet to hear back from ARTOC, but will update if we hear anything.

It's clear from the email that Volkswagen feels they are being shaken down by ARTOC, as they stated in the earlier-referenced letter to the House Committee on Science, Space, and Technology, which Volkswagen sent to the committee to present their side of the story to counter the lobbying pressure from groups like CASE for Consumers, and to reveal their suspicions regarding the origin of the attack ads and other efforts.

This alleged shakedown includes attempts made to pressure Volkswagen through further investigations and negative press coverage regarding the Dieselgate scandal, which they, of course, are quite eager to put behind them.

As the letter mentioned, the ARTOC Group has retained lobbying firm Holland & Knight for work with Congress on "Clean Air Act enforcement issues," which certainly seems related to Volkswagen's Dieselgate issues. Other lobbying firms like Ballard Partners mention working with the ARTOC group and their struggles with VW/Skoda right on their website.

Let's just take a moment to recap here, because this is a lot. The upshot seems to be that there's a pretty well-funded and organized campaign designed to put pressure on Volkswagen organized by Shafik Gabr and the ARTOC Group.

This campaign, while primarily focused on the Dieselgate scandal—which, let's be clear here, absolutely is a big deal and Volkswagen was unquestionably in the wrong—is not really about the Dieselgate scandal at all, or the (highly inaccurate) claims of VW "dumping" cars on the American market, or consumer protection, but is actually a campaign designed to pressure Volkswagen into paying money to the ARTOC Group who is still severely and possibly financially butt-hurt that they can no longer sell Skodas in Egypt.

All of this looks to be about selling cars we don't get in the U.S. in a country that's not the U.S. What looked, at first, like a political ad about very American-focused issues, from a group allegedly looking out for American consumers, may not have anything to do with America at all, really.

The world is very complicated and very weird, sometimes.

UPDATE (July 5, 2018 2:00 pm): The ARTOC Group issued a press statement, which I received via email. Here it is, in full:

"Press Statement by ARTOC Auto

Mr. M. Shafik Gabr completely rejects allegations by German VW Group of "manipulating actions in Congress against Volkswagen."

In an obvious attempt designed to deflect from its criminal conduct in the context of dieselgate and beyond, Volkswagen issued a slanderous and defamatory July 2, 2018 letter to the Chairman of the Committee on Science, Space, and Technology of the U.S. House of Representatives, as published in the media. The Committee had requested various documents from VW relating to its manipulation of diesel emission systems, as admitted by VW, publicly known as "dieselgate". In addition, it had asked VW's CEO Herbert Diess to attend a hearing in Washington. VW's attorney Robert Giuffra alleges that the information request was part of a "campaign" against VW and result of "attempted coercion" by ARTOC and Mr. M. Shafik Gabr. It is remarkable that VW tries to involve ARTOC Auto and Mr. Gabr with absurd conspiracy theories.

There is indeed a dispute between ARTOC Auto and VW/Skoda. 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, and he was managed by Mr. Werner Eichhorn (Skoda board member at the time). Mr. Eichhorn is presently employed in a senior position at VW America, in Herndon, Virginia. 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.

In 2017, a mediation between Volkswagen and ARTOC Auto by a high-profile and senior German statesman culminated in an agreement on September 1 in Berlin to end the relationship amicably. This agreement was reneged by Volkswagen 4 weeks later.

Moreover, ARTOC Auto's lawyers have contacted Mr. Giuffra on two occasions in order to achieve an amicable solution. On the first occasion, Mr. Giuffra declined to meet ARTOC Auto's German lawyers, and on the second occasion he did not respond to ARTOC Auto's American lawyers.

Separate from any actions taken by the U.S. Congress, ARTOC Auto, an American-Egyptian investment group is seeking its agreed compensations for damages incurred by VW's actions. This is a David vs. Goliath battle, where David (ARTOC Auto) firmly believes in the ultimate success of justice against a corporation which needs to practise ethics and good governance with transparency."