Volkswagen close to settlement on emissions
Volkswagen is on the verge of pleading guilty to criminal charges and paying $4.3 billion in fines, in a deal that would resolve a federal criminal investigation into its cheating on vehicle emissions tests, the automaker said Tuesday.
The expected guilty plea, and the recent arrest of a Volkswagen executive on conspiracy charges, buck a pattern of companies essentially paying their way out of criminal accusations. While companies often face large fines for wrongdoing, it is far less common for them to admit to breaking the law.
As a result of the deal, Volkswagen could be required to cooperate with investigations into individual company employees, accelerating the pace of those cases.
A guilty plea would also be likely to weaken the company’s ability to defend itself against investigations being done by state attorneys general, and against lawsuits brought by shareholders who accuse Volkswagen of waiting too long to disclose the financial risk of its emissions cheating.
According to two people briefed on the settlement, Volkswagen is expected to plead guilty to charges of conspiracy to commit wire fraud and to violate the Clean Air Act, customs violations and obstruction of justice. The people could not talk publicly about the deal because it is not yet final. Many of the 600,000 cars in the United States equipped with the emissions cheating software were imported from Germany or Mexico.
The $4.3 billion in fines includes both criminal and civil aspects of the govern-
ment’s case, including environmental and customs-related penalties. The fines would bring the total cost to Volkswagen in the United States to $20 billion, including settlements of civil suits by car owners, certainly one of the most costly corporate scandals in history.
Volkswagen said Tuesday that money it has set aside for scandal-related costs would not be sufficient to cover the latest agreement.
The deal with the government still requires approval by the company’s management and supervisory boards. The vote could come on Wednesday, the company said. The details of the agreement were provided by the company in a financial disclosure.
The Justice Department declined to comment.
Regulators in the United States began investigating Volkswagen in early 2014 after a study by West Virginia University showed that diesel cars polluted far more on the road than during official emissions tests.
Volkswagen executives knew that the cars were programmed to recognize when they were being tested and to deliver exemplary pollution readings, according to investigators. But rather than admit wrongdoing, company representatives provided false and misleading information for more than a year to the California Air Resources Board and the Environmental Protection Agency.
In addition, German prosecutors are conducting their own investigation, which would not be affected by the settlement with the United States.
Volkswagen said the settlement will include a statement of facts that are the basis for the fines but provided no details about what it might say. The statement could provoke further consequences if Volkswagen admits that top managers knew of the fraud sooner than they have acknowledged, or if any current top managers had knowledge of the cover-up.
Already, the fallout of the scandal has reached the top of the company. Martin Winterkorn, Volkswagen’s chief executive, resigned in September. German prosecutors are now investigating Winterkorn and another executive, Hans Dieter Poetsch, about whether they violated securities laws.
Shareholder lawsuits in the United States and Europe say that top managers knew of the cheating months if not years before the EPA issued a news release about the illegal software in September 2015. The lawsuits say that the company violated its duty to inform shareholders of the risk.
Volkswagen is one of a number of companies that have reached settlements with federal investigations recently in a flurry of activity before Donald Trump takes office as president.
In Volkswagen’s case, the settlement probably reflected eagerness by Obama appointees to reach a deal while they are still in office, as well as the company’s reluctance to gamble on the new leadership.