U.S. Sues Fiat Chrysler for Fraud in Emissions Certifications
Fiat Chrysler is being sued by the U.S. Department of Justice for rigging its emissions tests on 104,000 diesel vehicles sold since 2014.
The suit, which was filed in the U.S. District Court in Detroit on May 23, accuses the company of installing special “defeat devices” in Fiat Chrysler diesel vehicles produced between 2014 and 2016. These devices were never disclosed to the government (as required by law). They not only violated rules by being undeclared but also allowed what the lawsuit says were substantially-higher-than-allowable levels of nitrogen oxide (NOX), a pollutant that creates lung-health problems on its own and also contributes to smog.
If Fiat Chrysler is found guilty, the lawsuit demands that it fix all affected vehicles, bans it from selling any cars that emit higher-than-legal NOX emissions and requires it to pay civil penalties that could run to around $4.6 billion.
VM Motori S.P.A., a separate business unit of Fiat Chrysler that designed the engine that is the focus of the investigations, was also named as a defendant in this legal action. The Environmental Protection Agency and the Justice Department have apparently already seized documents from VM Motori that suggest serious issues of planning and intent in the matter. The specific part of VM Motori that was involved was housed at the headquarters for Fiat Chrysler in Michigan. Besides being hit with this civil suit, Fiat Chrysler is also the subject of criminal investigations by the Justice Department on the same issues. If those investigations convert to another set of legal actions, this time they could involve specific individuals within the company. Charges could involve issues “before the fact” (criminal conspiracy in the planning stages for the fraud), “during” (for those directing and/or involved in the fraud as it was happening) and “after the fact” (cover-up charges).the civil suit and criminal investigations build on charges by the State of California and the Environmental Protection Agency for Fiat Chrysler allegedly using special software to allow three years’ production of Jeep Grand Cherokees and Dodge Ram 1500 trucks to allow higher-than-legally-allowed excess diesel emissions.
Other lawsuits have also been filed by affected vehicle owners and some Fiat Chrysler auto dealers. The most significant of these so far have occurred in California.
Comparison with the Volkswagen Diesel Emissions Scandal
In both raw numbers and audacity, the Fiat Chrysler emissions-fixing mess is much smaller than the one Volkswagen admitted to just a few years ago.
In that case, VW had produced approximately 500,000 diesel cars for the U.S. market and 10.5 million additional on a global basis, all of which had problems similar to the allegations in the Fiat Chrysler case.
Those cars included their own brand of “defeat devices,” units that modified settings under EPA test modes and even had the capability to detect steering, throttle and other things used in the tests.
What VW had designed was a clever means of including two completely different forms of operation for their diesel vehicles. In “test” mode, the software adjusted the settings so everything was in full compliance. In “driving” mode, items such as injection timing, fuel pressure, exhaust recirculation parameters and the amount of urea fluid sprayed into the exhaust were altered significantly. In that driving mode, the engines could produce as much as 40 times the federally allowed limit for NOX emissions.
Besides the sheer number of cars affected by the fraud, the variety of cars VW produced that were producing excess diesel emissions was also staggering. The EPA cited the following list of VW vehicles that it had measured as not having passed emissions regulations – vehicles produced during the period in which the defeat devices were in place:
• 2009–2015 Volkswagen Jetta 2.0L TDI
• 2010–2015 Volkswagen Golf 2.0L TDI
• 2010–2015 Audi A3 2.0L TDI
• 2012–2015 Volkswagen Beetle 2.0L TDI
• 2012–2015 Volkswagen Passat 2.0L TDI
• 2009–2015 Audi Q7 3.0L V-6 TDI
• 2009–2016 Volkswagen Touareg 3.0L V-6 TDI
• 2013–2016 Porsche Cayenne Diesel 3.0L V-6
• 2014–2016 Audi A6 3.0L V-6 TDI
• 2014–2016 Audi A7 3.0L V-6 TDI
• 2014–2016 Audi A8/A8L 3.0L V-6 TDI
• 2014–2016 Audi Q5 3.0L V-6 TDI
For all of these crimes, VW ended up having to do far more than just pay a fine, fix the problem and move on. As of this writing, the following are just some of the things that have happened to VW as a result of its criminal actions:
• The company is banned from selling any new diesel vehicles in the United States. That includes – except for a handful of 2015 models that squeaked through – anything with the Volkswagen, Audi or Porsche nameplate and a diesel engine.
• The company had to agree to a $10 billion buyback program for all owners and lessors of cars found to have the illegal systems on board. Exact payouts vary depending on the ages of the cars and the models, but owners of cars produced prior to September 17, 2015, could receive between $12,500 and $44,000 per vehicle, and those in lease programs could receive cash settlements ranging from $2,600 to $4,900 per car.
• Other vehicles could be repaired under the program, with upgrades installed to meet the required emissions standards.
• VW was eventually sued in a $4.3 billion criminal and civil penalties case against the company in January 2017 and was finally sentenced in a federal court in Michigan in April 2017.
• In January 2017, the U.S. Department of Justice arrested six VW executives based on allegations of their involvement in this scandal. (Part of what was behind this were allegations by U.S. prosecutors that they had evidence of VW executive managers in Germany having been informed internally about the defeat devices in July 2015. According to information the prosecutors had gathered, those executive managers chose to keep that information from regulators.) vw had to plead guilty to violations of the Clean Air Act, also in January 2017. It was part of a settlement with the U.S. government that included a $4.3 billion fine.
• On January 6, 2017, a South Korean court sentenced a local VW executive to 18 months in prison for fabricating documents on emissions tests and noise level measurements in order to receive certification to allow those vehicles to be imported.
• On January 7, Oliver Schmidt, the former head of VW’S U.S. environment and engineering office, was arrested at Miami International Airport as he attempted to head to Germany after a Christmas vacation in Florida. He was denied bail and is still awaiting trial. Bail was denied in part because of the serious nature of the crime and because Germany does not allow extradition of German citizens to foreign countries.
• In January 2017, German government prosecutors announced that they had evidence that Martin Winterkorn, the now former VW chief executive who was in charge when VW was planning and carrying out the emissions-test fraud, not only knew about what was going on but actively took part in the scandal. He resigned in September 2015 and is now facing criminal charges, possible major fines himself and jail time.
The VW scandal was much bigger than the current Fiat Chrysler case. What should not be forgotten, however, is that the core issues are quite similar.
In both cases, the company involved knowingly committed fraud in an attempt to bypass emissions standards – this was no accident
• there were many people who had knowledge of what was happening, which constitutes criminal conspiracy,
• multiple models and several years of production were involved
• the means of fraud was sufficiently involved that it had become built into the process of designing and testing the affected vehicles
• by dumping large quantities of excess NOX emissions into the air, the affected vehicles caused great harm to human health and to greenhouse gas emissions worldwide.
Despite the similarities, it unfortunately now looks very much like Fiat Chrysler is going to be treated far differently than VW. With a weakened EPA headed up by Scott Pruitt, it is unclear that there will be any fines related to the emissions themselves. The Justice Department is also sounding like it will let things go with a fine and some settlement issues.
It may be that lawsuits from individual states, like California, and class-action cases from individuals and dealers will be where the big money penalties finally emerge.
But the one area where it looks like almost nothing is going to happen is jail time for American executives. There will be fines, sure, perhaps even in the individual criminal cases that eventually may get filed. Nothing, however, will rise to a serious enough level to teach anyone a lesson. In America, corporate crime pays and continues to pay because the criminals are almost never prosecuted.
When the final corporate/legal/market share balance sheet is tabulated for all that has happened to Fiat Chrysler, one can feel confident that at worst the shareholders will take a hit. The company will likely find it made a wise investment committing the crime. It was able to meet emissions standards to pass tests with less work, lower costs in its products and higher profits overall than if it had complied with the applicable laws in the first place. In America, the benefits of crime are usually greater than the costs – but only for corporations.
2014 Dodge Ram 1500 with Ecodiesel engine.