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Dieselgate: VW pleads guilty, will cough up $4.3bn, throws 6 staff under its cheatware bus

Techies charged by Uncle Sam

Busted ... Volkswagen motors (Photo by Hadrian / Shutterstock)

In one of the toughest smackdowns in recent US corporate history, Volkswagen has pleaded guilty to Dieselgate fraud charges, and will cop a massive fine.

Meanwhile, six staffers have been charged regarding the engine cheatware scandal and are facing the business end of a trial.

According to the US Department of Justice on Wednesday, Volkswagen has admitted three criminal felony counts of conspiracy to defraud the US and its citizens by violating the Clean Air Act, obstruction of justice, and importing cars into the country under false pretenses.

Volkswagen accepted three years of probation overseen by an independent corporate compliance monitor, and agreed to pay a $2.8bn fine to the US government. It will also shell out $1.5bn in civil penalties to the Environmental Protection Agency, US Customs and Border Protection, and the California Air Resources Board.

“Volkswagen’s attempts to dodge emissions standards and import falsely certified vehicles into the country represent an egregious violation of our nation’s environmental, consumer protection and financial laws,” said Attorney General Loretta Lynch.

“In the days ahead, we will continue to examine Volkswagen’s attempts to mislead consumers and deceive the government. And we will continue to pursue the individuals responsible for orchestrating this damaging conspiracy.”

Volkswagen admitted that it introduced a software cheating mechanism into its engines, which monitored whether emissions tests were taking place. The engine management system put the car in a low emissions mode for tests, and then reverted to spewing out much higher pollution levels during normal driving conditions.

“Volkswagen deeply regrets the behavior that gave rise to the diesel crisis,” said CEO Matthias Müller. “The agreements that we have reached with the US government reflect our determination to address misconduct that went against all of the values Volkswagen holds so dear. They are an important step forward for our company and all our employees.”

Crucially, Volkswagen agreed to “fully cooperate in the Justice Department’s ongoing investigation and prosecution of individuals responsible for these crimes.” This means the six employees that Uncle Sam wants to put on trial for their alleged part in the deception, one of whom has already been arrested.

Over the weekend, Oliver Schmidt, VW’s general manager of its engineering and environmental office in Michigan, was cuffed at a Florida airport on charges of defrauding the United States. Five other men – Heinz-Jakob Neusser, 56; Jens Hadler, 50; Richard Dorenkamp, 68; Bernd Gottweis, 69; and Jürgen Peter, 59 – have been similarly indicted and are still in Germany.

“This wasn’t simply the action of some faceless, multinational corporation,” said US Deputy Attorney General Sally Yates. “This conspiracy involved flesh-and-blood individuals who used their positions within Volkswagen to deceive both regulators and consumers. We’ve followed the evidence – from the showroom to the boardroom – and it brought us to the people whose indictments we’re announcing today.”

The US wants to prosecute these men, none of whom are members of Volkswagen’s management board, in its own courts. They are mid-level engine development and quality management techies, and it’s unclear if they can be extradited – fraud is covered in Germany’s extradition treaty [PDF] with the US, but the government has the final say.

The stiffness of the penalty and the pursuit of criminal charges against individuals is an unusually tough deal for a major corporation – and banks – in the US. Typically big firms are allowed to pay a fine with no admission of criminal activity, and staff never end up in the dock facing personal charges. ®

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