U.S. Indicts Six Volkswagen Executives in Emissions Scandal
German auto maker admits to criminal wrongdoing, to pay $4.3 billion penalty
Six Volkswagen AG executives were indicted by a grand jury on Wednesday as the German auto maker formally admitted to criminal wrongdoing in its diesel-emissions cheating case.
The company agreed to pay a $2.8 billion criminal fine and an additional $1.5 billion in civil penalties to resolve the last significant U.S. government action expected against the company over its cheating, which became public in September 2015.
Volkswagen has acknowledged that it rigged nearly 11 million diesel vehicles world-wide to cheat on emissions tests, including some 600,000 in the U.S. The vehicles produced toxic tailpipe emissions up to 40 times more than allowable limits during normal road use.
In the plea agreement, which was filed in federal court in Detroit and needs to be approved by a judge, the company agreed to “cooperate fully” in ongoing investigations into Volkswagen employees and executives.
“Volkswagen deeply regrets the behavior that gave rise to the diesel crisis,” Volkswagen Chief Executive Matthias Mueller said.
Volkswagen’s management and supervisory boards met Wednesday to approve the settlement.
“The trust of our customers, our shareholders, partners, employees and the general public is our most important asset. The Supervisory Board will spare no effort to ensure that Volkswagen fully restores their confidence,” said Hans Dieter Poetsch, Volkswagen chairman.
The Justice Department also said six Volkswagen executives had been indicted Wednesday by a federal grand jury for participating in the conspiracy.
Oliver Schmidt, who was once in charge of ensuring that Volkswagen vehicles complied with U.S. emissions, was arrested in Miami on Saturday and remanded to prison on Monday. The Justice Department said the other indicted executives not yet arrested are Heinz-Jakob Neusser, Jens Hadler, Richard Dorenkamp, Bernd Gottweis and Jürgen Peter. They are believed to be in Germany.
Jens Hadler, a former executive who was head of engine development before becoming chief of powertrain development in 2007, was surprised by the news that he had been charged, when informed by a reporter. Mr. Hadler declined to comment. Other executives couldn’t be reached for comment.
All were charged with one count of conspiring to defraud the U.S., defraud Volkswagen’s U.S. customers and violate the Clean Air Act by lying to regulators and the public about the ability of VW’s “clean diesel” technology to comply with U.S. emissions requirements.
Volkswagen admitted in the plea agreement that its supervisors and employees agreed to deceive regulators and customers between 2006 and 2015 about its cheating software, and that some of them tried to delete relevant documents after regulators were asking questions about the issue.
According to the plea agreement, several supervisors in the Volkswagen-brand engine development department realized the company couldn’t design a diesel engine to meet regulatory standards and attract U.S. demand, so they directed employees to create a software function to detect, evade and defeat U.S. emissions standards as early as 2006.
Some of the supervisors encouraged employees to hide their efforts, and in 2014 and 2015, misled regulators about the reasons for the discrepancy in road emissions and controlled tests, according to the agreement.
The obstruction of justice charge stems from efforts by a Volkswagen supervisor to delete a folder on a computer in August 2015, after a meeting to prepare for a presentation to a regulator.
Prosecutors said the penalty against the company was calculated based on an assessment that Volkswagen’s misconduct caused $8.5 billion in losses. Prosecutors said Volkswagen earned credit for its previous civil agreements to compensate customers and remediate the pollution, and for cooperating in the investigation, including its work in gathering “substantial amounts” of evidence and interviewing hundreds of witnesses.
“To be clear, Volkswagen knew of these problems, and when regulators expressed concerns, [executives] obfuscated…and they ultimately lied,” said U.S. Attorney General Loretta Lynch. Volkswagen will be placed on three years probation, she said, and must hire an independent monitor to audit the auto maker’s compliance practices.
Volkswagen’s sale of vehicles containing illegal defeat-device software allowing them to evade emissions tests “is a violation that cannot go unnoticed or unanswered,” said Environmental Protection Agency Administrator Gina McCarthy.
The charges resulted from a 16-month criminal investigation, said Federal Bureau of Investigation Deputy Director Andrew McCabe. “It’s now clear that Volkswagen’s top executives knew about this illegal activity,” Mr. McCabe said, adding they then purposefully kept stakeholders “in the dark.”
The Justice Department’s approach to the Volkswagen case comes after criticism prosecutors weren’t tough enough in previous corporate probes.
Deputy U.S. Attorney General Sally Yates in 2015 urged prosecutors to pursue individuals in corporate investigations amid criticism the Justice Department penalized companies without pursuing employees involved in alleged misconduct. A guilty plea from Volkswagen to criminal charges represented a further toughening still, after other auto makers avoided such corporate stains to resolve criminal cases stemming from safety transgressions.
“The fact that we are announcing charges today against six high ranking executives at Volkswagen…demonstrates that this is not just a paper policy,” Ms. Yates said. “Faceless multinational corporations don’t commit crimes, flesh and blood people commit crimes.”
Five of the six executives currently reside in Germany. Ms. Lynch said “it’s too early” to know whether those Volkswagen executives would travel to the U.S. to face charges.
Ms. Lynch said the Justice Department probe of Volkswagen employees is ongoing, suggesting others could be ensnared by prosecutors. “We will continue to look at individuals,” she said.