Volkswagen attempted to fraudulently avoid emission controls with its diesel models for almost a decade — and the Department of Justice will make them pay for it, literally and figuratively. Attorney General Loretta Lynch announced that they had reached a deal where VW will plead guilty to corporate criminal conduct and pay a total of $4.3 billion. Six top executives will face criminal indictments as well, although so far only one of them has been arrested:
Volkswagen has agreed to pay a total of $4.3 billion in criminal and civil penalties stemming from the German automaker’s efforts to cheat on federal and state emissions tests, the U.S. Department of Justice announced Wednesday.
That number includes $2.8 billion in criminal penalties as well as $1.5 billion to resolve environmental, customs and financial claims, the agency said. Volkswagen will also plead guilty to three felony counts, will be on probation for three years and will be overseen by a corporate compliance monitor for that time, DOJ said.
Six German executives and employees of Volkswagen have also been indicted and charged with one count of conspiracy to defraud the United States: Heinz-Jakob Neusser, 56; Jens Hadler, 50; Richard Dorenkamp, 68; Bernd Gottweis, 69; Oliver Schmidt, 48; and Jürgen Peter, 59.
Schmidt may well be the only one to face the fahrvergnügen in the US, thanks to a poorly timed visit to Miami. The US doesn’t have extradition with Germany, and according to the Washington Post, the DoJ doesn’t think that the other five will ever go to trial:
Prosecutors may have trouble bringing the executives to trial in the U.S. German law generally bars extradition of the country’s citizens except within the European Union. Privately, Justice Department officials expressed little optimism that the five VW executives still at large will be arrested, unless they surrender or travel outside Germany.
Still, the criminal charges are a major breakthrough for a Justice Department that been under pressure to hold individuals accountable for corporate misdeeds ever since the 2008 financial crisis
Lynch held out the possibility of charges against more high-ranking VW executives. “We will continue to pursue the individuals responsible for orchestrating this damaging conspiracy,” she said.
The fines are going to do enough damage as it is, but at least Volkswagen can see the light at the end of that tunnel. They had to agree to a $15 billion settlement fund to update or replace the cars they sold with the defeat devices and to settle other lawsuits. They will have enough problems rebuilding trust with American consumers, let alone the incoming Trump administration — which is another potential problem.
Lynch won’t be around much longer in any case, which leaves the issue with Jeff Sessions and Donald Trump. That sets up a curious situation for the new president, whose made no mystery about his feelings regarding imports that compete with American products, nor of his distaste for the EPA’s regulatory expansion. Does he let this slide because of general disinterest over enforcement of CAFE standards and EPA regulation, or does he pursue the executives with particular diplomatic fervor to make a point about American-made cars?
That’s not just an academic exercise, either. Trump has taken aim at VW’s production facilities in Mexico, where the company is building the new Tiguan for American consumption:
Volkswagen’s plant in Puebla is their largest and most modern outside of Germany, employing twice as many people as they have in all of the United States. …
The Mexican-made Tiguan and the Chattanooga-made Atlas are the cornerstones to the company’s plans to compete in the U.S. market. And a key strategy is giving both of the SUVs competitive prices. But a 35% Trump Tariff would blow that out of the water for the Tiguan.
So far, Volkswagen isn’t flinching. Unlike some U.S. automakers, they are not shifting production away from Mexico and into the U.S. At least not yet.
Don’t be surprised if Trump starts talking more about Puebla and the Tiguan in connection with the indicted VW execs. Given their credibility issues in the US, don’t be surprised if the flinching begins soon at VW, either.