Volkswagen AG is very close to an agreement with the U.S. Department of Justice (DOJ) in which it would plead guilty and pay $4.3 billion in penalties over the emissions cheating scandal. At press time, the German automaker was in advanced discussions with U.S. authorities and has negotiated a draft settlement agreement with the DOJ and U.S. Customs and Border Protection. The settlement includes a guilty plea over certain violations of criminal laws and measures to strengthen the company’s compliance systems. The settlement agreement has been approved by Volkswagen’s management and supervisory boards. The company said in a statement:
A final conclusion of the settlement agreement is further subject to the execution by the competent U.S. authorities and to the approval of the competent U.S. courts.
The agreement follows a civil settlement Volkswagen reached in June that’s worth up to $14.7 billion and includes vehicle buybacks and pollution control program funding to settle claims related to its scheme to evade government-mandated emissions testing in some 2.0-liter diesel engine cars. It included payments of $5,100 to $10,000 to most consumers who bought their cars before September 2015 – when the fraud was discovered – in addition to the buybacks. VW also agreed to invest $2 billion in projects that support the increased use of zero-emissions vehicles, as well as $2.7 billion to mitigate the effects of the emissions from cars equipped with defeat devices.
The U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) exposed Volkswagen’s scheme in September 2015, when they accused the company of deliberately installing defeat devices in the computers of many of its diesel vehicles. Volkswagen has since admitted fault and revealed that the software came preloaded in millions of its diesel vehicles around the world – nearly 600,000 of which were sold in the U.S. – allowing the vehicles to emit more toxins into the air after they leave testing labs and are out on the roads. The government hit VW and its subsidiaries with a Clean Air Act suit over the emissions cheating in January 2015.
The general manager of VW’s environmental and engineering office in Michigan wrote in emails and presentations to VW top management that steep penalties and indictments were possible if regulators found out, but it appears the bosses wanted to keep lying to the government and the public. For example, the manager, Oliver Schmidt, knew the vehicles had software installed that would recognize when the car was being tested and alter emissions output. The road-condition testing showed emissions of nitrogen oxide up to 40 times higher than U.S. standards.
Schmidt was part of a group that briefed higher-ups at Volkswagen about a study that found huge discrepancies in emissions levels when tested on the road as opposed to when simulating road conditions with a dynamometer, as was the practice at the EPA and CARB. Schmidt, who had been promoted and reassigned to Germany, had agreed to come back and brief U.S. and California officials on the discrepancies. Schmidt and other employees knew all about the device, and top officials, after being informed about the so-called defeat device, authorized its continued concealment.
In early January, German lawyers filed a complaint against VW on behalf of a diesel car owner demanding the company buy back the emissions-compromised vehicle for the purchase price in a novel case that could put pressure on the European Union to adopt a class action-type legal structure. The suit argues that VW sold the cars under fraudulent terms, without any type of government approval, and that they must be bought back.
Volkswagen, its former CEO and other individuals must face a lawsuit from investors filed in the wake of the scandal despite their arguments that the case belongs in Germany. However, a California federal judge ruled against them on that issue.
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