VW to pay $4.3 billion
Automaker admits guilt in emissions cheating scandal
Six high-level Volkswagen employees have been indicted by a grand jury in the company’s emissions cheating scandal, as the company admitted wrongdoing and agreed to pay a record $4.3 billion penalty.
In announcing the federal indictments and plea deal Wednesday in Washington, the Justice Department detailed an elaborate and wide-ranging scheme to commit fraud and then cover it up. At least 40 VW employees were involved in destroying evidence, the government said.
The penalty against the company is the largest ever levied by the government against an automaker, eclipsing the $1.2 billion fine against Toyota in 2014 over safety issues related to unintended acceleration.
The automaker will pay a $2.8 billion criminal fine and $1.5 billion in civil penalties for rigging more than half a million vehicles with software to cheat pollution laws and lying to U.S. investigators about the nature of the conspiracy.
“Volkswagen obfuscated, they denied and they ultimately lied,” U.S. Attorney General Loretta Lynch told reporters.
The VW executives charged in a grand-jury indictment included one of the company’s highest-level executives, Heinz-Jakob Neusser, who led development of the Volkswagen brand from July 2013 until September 2015 and engine development from Octo-
ber 2011 until July 2013.
The charges undermine VW’s past claims that the scheme was the responsibility of an isolated group of employees acting without authority from top leaders.
“It is now clear that Volkswagen’s top executives knew about this activity and deliberately kept regulators and consumers in the dark,” FBI Deputy Director Andrew McCabe told reporters.
Volkswagen promised it is changing its ways since the scandal erupted and said it “cooperated” with the investigation, even as it admitted guilt to obstructing the probe. The automaker said it shared with prosecutors “all findings” of an internal probe conducted by law firm Jones Day at the company’s request.
“We have taken significant steps to strengthen accountability, enhance transparency and prevent something like this from happening again,” VW global CEO Matthias Mueller said in a statement. “We are determined that Volkswagen will become an example of how a socially responsible company should act and lead in the years ahead — and we know that our success can never be divorced from the way we conduct ourselves.”
The deal with the Justice Department comes after the Environmental Protection Agency and California Air Resources Board in September 2015 exposed VW’s insertion of the illegal software to trick regulators into believing diesel cars and utility vehicles were compliant with emissions standards. They were tipped off to the violations after a West Virginia University team coordinating with the International Council on Clean Transportation uncovered discrepancies in emissions performance in VW diesel vehicles.
The company has agreed to submit to an independent regulatory compliance monitor for three years. The civil violations, for VW did not acknowledge legal liability, include accusations that VW lied to customs officials about import law compliance.
Executives charged
One executive, general manager Oliver Schmidt, was charged Monday in Florida for allegedly conspiring to cheat regulations. The other five remain in Germany and Lynch declined to say whether the U.S. believes it can reach a deal to transfer them into the American judicial system.
“It is valuable that DOJ has charged the five VW executives, but the questions now are whether the U.S. can hold them accountable, as they are in Germany, and how many others may be charged and, if so, when?” University of Richmond law professor Carl Tobias, who studies corporate liability, said in an email.
Another unanswered question is whether Lynch’s successor in the Trump administration will pursue the implementation of the settlement aggressively, Tobias said.
In addition to Neusser and Schmidt, the Justice Department charged former VW engine development head Jens Hadler, former engine development after-treatment head Richard Dorenkamp, former VW quality and safety supervisor Bernd Gottweis and VW quality management and product safety group employee Jürgen Peter.
The Federal Bureau of Investigation’s probe has centered on two unidentified cooperating witnesses and a third VW worker, James Liang, who pleaded guilty in September to conspiracy, according to a criminal complaint unsealed Monday.
The charges come as federal investigators are under pressure to show that they can bring corporate leaders to justice.
“No corporation is too big, no corporation is too global, no person is beyond the law,” McCabe said. “We will continue to take on these complicated, challenging investigations.”
VW still faces a criminal investigation in Germany, as well, including accusations that VW’s chairman and former CEO did not adequately disclose the potential costs of the scandal to VW shareholders.
The automaker recently agreed to separate civil settlements worth about $17 billion for U.S. consumers and dealers who own diesel vehicles affected by the scandal, authorizing buybacks and free fixes.
The company, which reportedly wanted to reach a deal before the inauguration of Donald Trump cast a cloud of uncertainty over regulatory policy, had set aside more than $19 billion to cover the costs of the scandal. But the likely outcome brings the tab to nearly $22 billion.
“In the broader scheme of things we believe the most important news is that VW managed to come to an agreement that allows the company to move on from here,” Evercore ISI analyst Arndt Ellinghorst said in a note to investors. “It’s a major relief that this doesn’t get dragged into the new U.S. administration.”
VW investors appeared heartened that the matter is coming to a resolution. Shares traded in Germany rose 3.4% Wednesday.
The company’s Chattanooga, Tenn., plant, its only U.S. manufacturing operation, will not be affected by the settlement, Tennessee Gov. Bill Haslam said in a statement.
VW executives told reporters at the Detroit auto show earlier this week that they will press ahead with plans to manufacture the new Atlas sportutility vehicle at the factory.