VW to plead guilty to 3 Dieselgate charges and to pay $4.3 billion in criminal and civil penalties

Article by Christian A., on January 31, 2017

We are guilty. We are likely to hear Volkswagen AG utter similar words soon following an agreement with the United States Department regarding the so-called Dieselgate scandal. Matters regarding the Dieselgate scandal recently took an amazing turn after Volkswagen and the DOJ reached an agreement in which the German carmaker will enter a guilty plea to three criminal felony counts and pay billions of dollars in penalty.

As part of the agreement, VW will plead guilty to: a conspiracy to defraud the United States and its customers in the country; obstruction of justice for destroying documents related to the Dieselgate scandal; and using false statements about the vehicles’ compliance with emissions limits with the aim of importing them into the US. Aside from pleading guilty, VW will be placed under probation for three years. An independent corporate compliance monitor will also be appointed to supervise VW for at least three years. VW will also pay a criminal penalty of $2.8 billion.

The agreement was an offshoot of the so-called Dieselgate scandal, which is essentially a scheme implemented by VW to sell around 590,000 diesel-powered vehicles in the US – from model years 2009 to 2016 -- by making it seem that these units were cleaner than they actually were. Regulators have found out that VW employed a defeat device that helps these vehicles cheat on emissions tests.

On the other hand, six VW executives and employees were indicted by a federal grand jury in the Eastern District of Michigan for their roles as co-conspirators in the Dieselgate scandal. These six people included Heinz-Jakob Neusser who served as head of Development for VW Brand and of Engine Development for VW.

Neusser’s predecessor as head of Engine Development for VW -- Jens Hadler – was also indicted, as well as Richard Dorenkamp, team leader of engineers who developed the first of the two emissions-cheating diesel engines. Also indicted were Bernd Gottweis, Oliver Schmidt and Jurgen Peter. Peter served as one of the VW liaisons between the regulators and VW. All of them were charged with conspiracy and for issuing false statements. Dorenkamp, Neusser, Schmidt and Peter were also charged with Clean Air Act violations. Neusser, Gottweis, Schmidt and Peter were likewise indicted for wire fraud counts.

According to the Justice Department, the scheme actually commenced in 2006, when VW engineers started designing a new diesel engine that would comply with stringent US emissions standards while still appealing to customers in the market. When they soon realized that they couldn’t create such engine, they decided to employ software that could cheat standard US emissions tests. If the software detects that the engine is being tested, it would make the vehicle operate in a mode that satisfies Nitrogen Oxide emissions standards in the US. If not being tested, the engine would operate in another mode that results to NOx emissions that are up to 40 times higher than prescribed.

Meanwhile, VW has agreed to pay $1.5 billion in total civil penalties to regulators. The amount includes $1.45 billion to resolve civil penalty claims to the Environmental Protection Agency (EPA) and the US Customs and Border Protection. VW will pay $50 million in civil penalties for alleged violations of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

The recent penalties – amounting to $4.3 billion – adds up to a $14.7-billion deal concerning its 2.0-liter diesel-powered vehicles and a $1-billion agreement regarding 3.0-liter diesel cars.

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Topics: vw, dieselgate, lawsuit

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