Volkswagen took a major step toward resolving one of the darkest chapters in its history Wednesday, pleading guilty to an emissions-cheating scandal and agreeing to pay $4.3 billion in criminal and civil charges as the U.S. announced charges against five new individuals.
As part of its settlement, VW pleaded guilty to charges of conspiracy, obstruction of justice and using false statements to import cars to the U.S. VW executives Heinz-Jakob Neusser, Jens Hadler and Richard Dorenkamp were among those charged with conspiracy.
The court filings detail a scheme in which the German automaker deceived regulators and customers for years, and dozens of employees destroyed documents, even after the scandal broke in September 2015.
The emissions-cheating disclosures undermined the sterling reputation of German engineering and threatened the viability of a company that vies with Toyota as the world’s biggest carmaker. Volkswagen pressed to resolve investigations and lawsuits as quickly as possible, while working to repair its reputation with car buyers and dealers. It’s now selling more cars and trucks then ever, offsetting declines in the U.S. with strong sales in China.
VW admitted in 2015 that about 11 million diesel cars worldwide were outfitted with so-called defeat devices, embedded algorithms used to game emissions tests. The settlement pushes the cost of the scandal to more than $23 billion in the U.S. and Canada and will force the company to increase the money set aside to pay fines and compensate affected customers, which currently totals 18.2 billion euros ($19.1 billion).
The government and Volkswagen have been trying to reach a settlement by Jan. 20 before Donald Trump is sworn into office and many of the people who have been overseeing the case step down. Though the case ends the company’s exposure to U.S. federal authorities, VW still faces probes from 42 state attorneys generals and a criminal probe and lawsuits in Germany.
Over the weekend, Oliver Schmidt, VW’s liaison with U.S. environmental regulators, was arrested in Miami as he was returning to Germany from vacation. An engineer has already pleaded guilty, and prosecutors are preparing to charge more high-level German-based executives in the case, a person familiar with the matter has said.
The Volkswagen plea, filed in federal court in Detroit, serves as a capstone for Attorney General Loretta Lynch’s enforcement of corporate misconduct and stands as one of the top environmental cases pursued under President Barack Obama. Investigated in just over 16 months, the Justice Department case also delivers on promises to hold individuals accountable.
In 2014, as U.S. suspicions increased about the real level of emissions from VW diesel cars, engineers and supervisors plotted ways to hide the defeat device, according to court documents. The next year, when regulators threatened not to certify 2016 models for sale in the U.S., Volkswagen’s senior officials in Wolfsburg, Germany, were told at a July 27 meeting about the deception.
Senior VW managers approved a plan in August 2015 for what the automaker’s employees would say in an upcoming meeting with California regulators, prosecutors allege. That plan called for Volkswagen employees to continue concealing the existence of the emissions device.
Dozens of Volkswagen officials in Germany have hired U.S. criminal defense lawyers over the past several months as the Justice Department ramped up its investigation, Bloomberg reported last month. U.S. authorities have traveled to Germany to arrange interviews with managers and seek cooperation.
VW has suspended or pushed out about a dozen executives in the aftermath of the scandal including former Chief Executive Officer Martin Winterkorn, who has denied any knowledge of the cheating.
The U.S. can charge individuals in Germany, but getting executives to stand trial in the U.S. could be difficult because Germany’s constitution bars extradition of German nationals to foreign countries other than European Union members.
VW has been making strides to wrap up other outstanding lawsuits in the U.S. On Friday, the EPA and California regulators gave their first approval to a plan to fix to some of the cars. A San Francisco judge has approved $14.7 billion settlement that requires the company to fix or buy back about 480,000 of the cars in the U.S. with 2.0-liter engines cars. VW is awaiting approval on a $1 billion deal concerning 3.0-liter engines.
(c) 2017, Bloomberg · Tom Schoenberg, Christoph Rauwald, David McLaughlin