Volkswagen AG on Monday rejected suggestions that former chief executive Ferdinand Piech may have known at an early stage about improper spending involving its employee council.

The allegations arose at the trial in Braunschweig of former employee council leader Klaus Volkert, who is charged with inciting breach of trust.

Volkert is a key figure in an investigation revolving around whether VW employee representatives received illegal privileges, including lavish foreign trips paid for by the company. The investigation started after Volkswagen alerted prosecutors to possible wrongdoing.

On Monday, prosecutors called for former VW chief financial officer Bruno Adelt and two other managers to testify about allegations that Adelt discussed high spending on works council travel at an early stage with Piech, then CEO and now VW's supervisory board chairman. The two other managers allegedly were then tasked with an internal examination of an account that covered the spending.

Prosecutor Ralf Tacke said the claims had come from a journalist, but did not offer details. Presiding Judge Gerstin Dreyer said her court wanted to hear the witnesses, but did not immediately set a date.

Volkswagen swiftly issued a statement rejecting assertions that there was a review between 1997 and 2002 of the account through which the works council expenses were cleared.

``There was no such review because there were no indications'' of improper activities, it said. ``The company and its chief executive at the time therefore had no knowledge of the misappropriations.''

Piech, who is not under investigation in the case, told prosecutors last year that he knew nothing of alleged improper spending at the company.

In the first trial in the scandal, former VW personnel chief Peter Hartz admitted in January to having awarded ``special bonuses'' worth some 1.9 million euros (US$2.8 million) in VW funds to Volkert in an effort to curry favour.

Hartz, who has said Piech and other board members were not aware of the payments, was given a two-year suspended prison sentence and a fine.