Feds: Volkswagen exec tricked Americans into buying dirty cars – Detroit Free Press
While unveiling shiny new cars at a world-renowned event, German auto giant Volkswagen got a less-than-flattering review from one peeved customer: the FBI.
On Monday morning, just as the North American International Auto Show kicked into high gear in Detroit, the federal government charged a high-ranking Volkswagen executive for his alleged role in a years-long emissions scandal that prosecutors say tricked unwitting Americans into buying dirty vehicles that polluted the environment.
According to a criminal complaint unsealed in U.S. District Court in Detroit, Oliver Schmidt, a Volkswagen general manager in Auburn Hills who oversaw the company’s Environmental and Engineering office, “knowingly participated in a conspiracy” that defrauded U.S. regulators and customers by rigging cars to cheat emissions tests. The complaint cited the ongoing emissions scandal, noting that U.S. regulators had repeatedly asked Volkswagen to explain discrepancies in emissions tests, but the company continued to cover up what was happening while “appearing to cooperate.”
Volkswagen, the FBI claims in the complaint, was installing software that was designed to detect and cheat U.S. emissions tests, making it look like its diesel-engine vehicles met U.S. standards and were otherwise “clean” when in fact they were not. A 2014 study discovered the problem and found that Volkswagen diesel vehicles emitted substantially higher emissions when being driven on the road than when undergoing standard U.S. emissions tests.
“Schmidt knew that the reason for this discrepancy was that VW had intentionally installed software in the diesel vehicles it sold in the U.S. … designed to detect and cheat U.S. emissions tests,” stated the complaint, which claimed many at Volkswagen were involved in the scheme.
“VW employees knew that if they had told the truth and disclosed the existence of the defeat device, VW could not have sold any of its diesel vehicles in the United States,” FBI agent Ian Dinsmore wrote in an affidavit attached to the complaint.
The criminal case surfaced just as Volkswagen and Audi were preparing to reveal new cars and SUVs at the highly anticipated auto show, which got under way over the weekend but opens to the public Saturday.
The German automaker has previously admitted to rigging its diesel autos to beat emissions tests and is paying about $11 billion to buy back those cars and to compensate owners.
“Volkswagen continues to cooperate with the Department of Justice as we work to resolve remaining matters in the United States. It would not be appropriate to comment on any ongoing investigations or to discuss personnel matters,” the company said in a statement e-mailed to the Free Press.
Schmidt, 48, of Germany, who was arrested in Florida on Saturday, was arraigned Monday in Miami and will appear in Detroit at a later date, said U.S. Attorney Barbara McQuade, whose office is handling the case.
He was ordered temporarily jailed and will remain locked up until at least Thursday. That’s when a detention hearing will be held in Miami to determine whether to release him on bond or keep him jailed pending the outcome of the case.
At Audi’s news conference, executives said Volkswagen’s luxury brand set sales records in both the U.S. and globally, but also said 2016 was a “challenging year.”
“We are going to focus on our business model. It’s what our dealers want, it’s what employees want, it’s what our customers want,” Scott Keogh, president of Audi of America, said after the automaker’s news conference at the Detroit auto show. “What happened … frankly I have no comment. I know we are negotiating. I know we are working through this.”
According to the complaint, Schmidt was targeted in a broader FBI investigation that has so far ensnared two Volkswagen employees, who have been charged, and four cooperating witnesses, who agreed to help the government in exchange for immunity from prosecution.
According to the affidavit, here is how Schmidt landed on the FBI’s radar and how Volkswagen pulled off this alleged scheme:
In 2014, a West Virginia University study commissioned by the International Council on Clean Transportation found that certain VW vehicles with diesel engines emitted pollutants that far exceed U.S. standards — in some cases up to 40 times the permissible limit. The study also identified “substantial discrepancies” in emissions by VW vehicles on the road compared with during U.S. emissions tests.
The FBI unraveled the scheme with the help of five cooperating witnesses, including VW engineer James Liang, who worked in the company’s engine development department and pleaded guilty to conspiracy in September for his role in the scam. As part of his plea agreement, he agreed to cooperate in exchange for leniency at sentencing.
According to Liang and an unnamed witness, starting in 2006, Volkswagen was in the midst of designing a new diesel engine that would be the cornerstone of a new project to sell passenger diesel vehicles in the U.S. Volkswagen employees knew they couldn’t design a diesel engine that would meet heightened emission standards in the U.S., so instead they designed software that would cheat the test and fool American regulators.
But then came the 2014 ICCT study that discovered the scheme.
According to the complaint, Schmidt learned of that study on April 2, 2014, in an e-mail. That same day, he wrote an e-mail to a colleague stating: “It should first be decided whether we are honest. If we are not honest, everything stays as it is. ICCT has stupidly just published measurements of NAR diesel off-cycle, not good.”
A month later, Schmidt e-mailed Volkswagen’s then CEO a document that analyzed the “possible consequences/risks” of the study. It noted possible monetary penalties per vehicle of up to $37,500 from the EPA, with 500,000 to 600,000 affected vehicles. The document also noted, “Difference between street and test stand must be explained. (Intent = penalty!”) In his cover e-mail, Schmidt noted, “the EPA is currently starting a research project on this topic.”
A year later, in the summer of 2015, Schmidt took charge of the emissions controversy and played a key role in Volkswagen’s response to questions from U.S. regulators about the emissions discrepancy.
According to cooperating witnesses, when U.S. regulators threatened not to certify Volkswagen’s 2016 models for sale in the U.S., the company’s top executives requested a briefing on the situation with American regulators. But before that meeting, Volkswagen held a series of meetings to determine how it would respond.
The plan was to continue the cover-up, the complaint said.
It wasn’t until Sept. 3, 2015, in a meeting in El Monte, Calif., when a Volkswagen manager “formally admitted that VW had intentionally installed a defeat device in its ‘clean diesel’ vehicles.’ “
The scheme, witnesses said, helped sell an estimated 500,000 Volkswagen vehicles in the U.S. over a six year period – all of them equipped with rigged software.
Contact Tresa Baldas: firstname.lastname@example.org. Follow her on Twitter @Tbaldas. Staff writer Robert Allen contributed to this report.