Volkswagen pleads guilty to US criminal charges, agrees to pay $4.3 billion

When you sell 'dirty diesel' vehicles you must pay the consequences

The US Department of Justice (DOJ) announced today that Volkswagen AG has agreed to plead guilty to criminal felony charges and pay a $2.8 billion criminal penalty as a result of a scheme to sell 590,000 diesel vehicles in the United States by using a “defeat device" to cheat on US EPA and California ARB emission tests, and lying and obstructing justice to further the scheme.

In separate civil resolutions of environmental, customs and financial claims, VW has agreed to pay $1.5 billion. This includes EPA’s claim for civil penalties against VW in connection with VW’s sale of these cars, as well as US Customs and Border Protection (CBP) claims for customs fraud. The agreements also resolve alleged violations of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

Criminal Case. VW has been charged with participating in a conspiracy to defraud the United States and VW’s US customers and to violate the Clean Air Act by lying and misleading the EPA and US customers about whether certain VW, Audi and Porsche diesel vehicles complied with US emission standards, using cheating software to circumvent the US testing process and concealing material facts about its cheating from US regulators. VW has been also charged with obstruction of justice for destroying documents related to the scheme, and with a separate crime of importing these cars into the US by means of false statements about the vehicles’ compliance with emissions limits.

Under the terms of the plea agreement—which must be accepted by the court—VW will plead guilty to all these charges, will be on probation for three years, will be under an independent corporate compliance monitor who will oversee the company for at least three years. Volkswagen also agreed to fully cooperate in the DOJ’s investigation and prosecution of individuals responsible for these crimes.

In connection with the investigation, a federal grand jury in the Eastern District of Michigan returned an indictment today charging six VW executives and employees for their roles in the nearly 10-year conspiracy. The list of indicted VW personnel includes:

1. Heinz-Jakob Neusser: from July 2013 until September 2015, Neusser worked as head of Development for VW Brand and was also on the management board for VW Brand. From October 2011 until July 2013, Neusser served as the head of Engine Development for VW.
2. Jens Hadler: from May 2007 until March 2011, Hadler worked as head of Engine Development for VW.
3. Richard Dorenkamp: from 2003 until December 2013, Dorenkamp worked as the head of VW’s Engine Development After-Treatment Department in Wolfsburg, Germany. From 2006 until 2013, Dorenkamp led a team of engineers that developed the first diesel engine that was designed to meet the US Tier 2 emissions standards.
4. Bernd Gottweis: from 2007 until October 2014, Gottweis worked for VW as a supervisor with responsibility for Quality Management and Product Safety.
5. Oliver Schmidt: from 2012 through February 2015, Schmidt was the General Manager in charge of the Environment and Engineering Office, located in Auburn Hills, Michigan. From February 2015 through September 2015, Schmidt returned to VW headquarters to work directly for Neusser, including on emissions issues.
6. Jurgen Peter: Peter worked in the VW Quality Management and Product Safety Group from 1990 until the present. From March 2015 until July 2015, Peter was one of the VW liaisons between the regulatory agencies and VW.

The DOJ provided the following summary of developments in the VW diesel emission case:

In 2006, VW engineers began to design a new diesel engine to meet stricter U.S. emissions standards that would take effect by model year 2007. This new engine would be the cornerstone of a new project to sell diesel vehicles in the United States that would be marketed to buyers as “clean diesel," a project that was an important strategic goal for VW’s management. When the co-conspirators realized that they could not design a diesel engine that would both meet the stricter NOx emissions standards and attract sufficient customer demand in the U.S. market, they decided they would use a software function to cheat standard U.S. emissions tests.

VW engineers working under Dorenkamp and Hadler designed and implemented a software to recognize whether a vehicle was undergoing standard U.S. emissions testing on a dynamometer or it was being driven on the road under normal driving conditions. The software accomplished this by recognizing the standard published drive cycles. Based on these inputs, if the vehicle’s software detected that it was being tested, the vehicle performed in one mode, which satisfied U.S. NOx emissions standards. If the software detected that the vehicle was not being tested, it operated in a different mode, in which the vehicle’s emissions control systems were reduced substantially, causing the vehicle to emit NOx up to 40 times higher than U.S. standards.