VW diesel acts were likely criminal, U.S. finds; settlement talks underway

Consumer Reports tests 2015 Volkswagen Jetta TDI diesel in 'cheat mode,' October 2015

Consumer Reports tests 2015 Volkswagen Jetta TDI diesel in ‘cheat mode,’ October 2015

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The proposed $15 billion settlement between Volkswagen and regulators over its emission-cheating diesel cars is winding toward final approval, but VW’s miseries are far from over.

U.S. attorneys have been investigating the company and its introduction of “defeat device” software to pass EPA emission tests since that story broke last September.

Now more news on the legal front has landed, as of yesterday afternoon.

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Justice Department officials have uncovered evidence that would qualify VW’s actions as criminal, according to an exclusive report in The Wall Street Journal (may require registration).

Even before specific charges are levied, U.S. prosecutors have begun to negotiate with the company over possible settlement terms for the criminal case.

Their goal, the Journal suggests, citing “people familiar with the matter,” is to reach an agreement by the end of this year—although that timeline could well slip.

Any such settlement would be separate from the $15 billion VW has agreed to spend on compensating owners, buying back or modifying their cars, and established two separate remediation funds to offset emission damage.

Settling the potential U.S. criminal charges would also likely run to several billion dollars, the report says.

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However, prosecutors look favorably on VW’s willingness to admit its guilt and work toward the settlement with owners, it says, meaning the penalties may be less severe than they otherwise might be.

The largest penalty paid by an automaker for intentional violation of U.S. laws to date has been $1.2 billion, levied in 2014 against Toyota for concealing reports of unintended acceleration in a wide range of its vehicles.

The U.S. prosecutors haven’t yet decided, however, whether to require Volkswagen to plead guilty to criminal acts or to grant the company a deferred prosecution agreement—similar to Toyota’s—under which VW would pledge to abide by settlement terms in exchange for later dropping of the charges.

Prosecuting specific VW Group employees individually for criminal acts under U.S. law would be complicated by the fact that most of the employees under investigation are German citizens, working in that country.

VW Group has thus far set aside roughly $21 billion to cover the costs of the diesel emission scandal, which affected 11 million diesel vehicles sold globally.

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While that amount seems likely to cover its U.S. civil and criminal settlements, it still faces dozens of actions from individual U.S. states and regulators and owners in many other countries where it sold those vehicles under brands that included Volkswagen, Audi, and Porsche.

Earlier this year, VW indefinitely delayed the release of an independent investigation on the deception by law firm Jones Day.

The report was to have been released at VW Group’s annual meeting in April, but it attributed the delay to potential legal implications of employee and company actions.

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