According to a joint investigation by the Suddeutscher Zeitung newspaper, and the NDR and WDR television networks, Hatz was arrested earlier this week by prosecutors in Munich who are investigating the affair on behalf of the German government.
The public prosecutor's office confirmed on Thursday it had arrested an unnamed individual in relation to its investigations, and was in the process of executing related search warrants.
Hatz is not the first Volkswagen Group employee arrested over the Dieselgate scandal, but, if this report proves to be true, he is the most senior to date. The former engine boss is said to be a close friend and confidant of Martin Winterkorn, the Group's former CEO.
He held senior roles related to engine development during the period when the company's various marques were developing and using diesel engines with software designed specifically to detect emissions bench testing, and automatically switch to operating in a legally compliant manner.
In 2011, Hatz joined Porsche as its head of research and development. In 2015, after news of the Dieselgate affair hit the press, he was suspended from his position at Porsche. A year later, a hefty severance package was worked out, although it's understood he will have to pay this money back should he be successfully convicted.
The arrest earlier this year of Zaccheo Giovanni Pamio, former head of thermodynamics at Audi, is said to have played a role in leading to Hatz' arrest.