Volkswagen pleads guilty, agrees to pay $6 billion to settle US case

Attendees stand in front of a Volkswagen sign during the 2017 North American International Auto Show in Detroit, Michigan, Jan 10, 2017.
Attendees stand in front of a Volkswagen sign during the 2017 North American International Auto Show in Detroit, Michigan, Jan 10, 2017.PHOTO: BLOOMBERG

(WASHINGTON POST) - Volkswagen took a major step towards resolving one of the darkest chapters in its history on Wednesday (Jan 11), pleading guilty to an emissions-cheating scandal and agreeing to pay US$4.3 billion (S$6.1 billion) in criminal and civil charges as the US announced charges against five new individuals.

As part of its settlement, Volkswagen pleaded guilty to charges of conspiracy, obstruction of justice and using false statements to import cars to the US.

Volkswagen 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 US with strong sales in China.

Volkswagen 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 US$23 billion in the US 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 (S$27 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 US federal authorities, Volkswagen still faces probes from 42 state attorneys-generals and a criminal probe and lawsuits in Germany.

Oliver Schmidt was arrested in Miami as he was returning to Germany from vacation. PHOTO: REUTERS

Over the weekend, Oliver Schmidt, Volkswagen's liaison with US 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 US suspicions increased about the real level of emissions from Volkswagen 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 US, Volkswagen's senior officials in Wolfsburg, Germany, were told at a July 27 meeting about the deception.

Senior Volkswagen 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 US criminal defence lawyers over the past several months as the Justice Department ramped up its investigation, Bloomberg reported last month. US authorities have travelled to Germany to arrange interviews with managers and seek cooperation.

Volkswagen 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 US can charge individuals in Germany, but getting executives to stand trial in the US could be difficult because Germany's constitution bars extradition of German nationals to foreign countries other than European Union members.

Volkswagen has been making strides to wrap up other outstanding lawsuits in the US. 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 US$14.7 billion settlement that requires the company to fix or buy back about 480,000 of the cars in the US with 2-litre engines cars. Volkswagen is awaiting approval on a US$1 billion deal concerning 3-litre engines.