US judge orders Volkswagen to pay US$2.8 billion criminal penalty

A federal judge in Detroit on Friday sentenced Volkswagen to three years of probation and ordered the automaker to pay a US$2.8 billion (S$3.9 billion) criminal fine tied to the emissions cheating scandal, which it settled earlier this year.
People walk past signs for Volkswagen at the Auto Shanghai 2017 vehicle show, April 20, 2017.
People walk past signs for Volkswagen at the Auto Shanghai 2017 vehicle show, April 20, 2017.PHOTO: BLOOMBERG

CHICAGO (AFP) - A US judge on Friday (April 21) sentenced Volkswagen to pay a US$2.8 billion (S$3.9 billion) criminal penalty in the diesel emissions cheating scandal, in line with a deal struck between the automaker and the US government.

The district court judge in Detroit also placed the German auto maker on three years of probation, settling the US criminal case over the scandal that has roiled the firm since 2015.

The German automaker has agreed to pay a total of more than US$23 billion in fines and compensation in the United States - including penalties to federal and state authorities, as well as consumers and car dealers - in one of the costliest corporate scandals in history.

With Germany conducting its own probe, the final bill could be even higher.

Volkswagen in January agreed to plead guilty to three felony charges of defrauding the United States and conspiring to violate the Clean Air Act by installing so-called defeat devices on diesel-powered cars to evade emissions standards.

In addition to the criminal penalty, which it agreed to under the plea agreement, Volkswagen will pay a separate US$1.5 billion civil penalty. It also agreed to cooperate with federal investigators.

"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," the company said on Friday in a statement.

"Volkswagen today is not the same company it was 19 months ago - the change process under way is the biggest in our history."

Former deputy assistant attorney-general Larry Thompson was appointed to monitor the company's compliance with the terms of the deal.

"This is a case of deliberate massive fraud perpetrated by VW management," Judge Sean Cox said during the sentencing hearing in Detroit.

One aspect of the case that remains unresolved is the fate of Volkswagen executive Oliver Schmidt who US authorities arrested in Miami in January, one of seven company employees who have been charged.

Judge Cox refused to release Schmidt on bond, agreeing with prosecutors that he risked fleeing to Germany, which does not extradite its citizens.

Five other company officials charged in January are believed to be in Germany.

Regulators in 2015 discovered that Volkswagen diesel cars, marketed as clean, in fact spewed up to 40 times the permissible limits of nitrogen oxide during normal driving, but this was hidden during emissions testing.

As many as 11 million vehicles sold worldwide were configured to cheat emissions tests. The car maker has agreed to buy back approximately half a million cars in the US.

Volkswagen developed the illegal technology in 2009 and, according to court documents, prosecutors believe senior employees attempted a cover-up after learning of the illegal technology in 2015.