Volkswagen execs indicted, accused of lying to U.S., California officials in diesel pollution scandal

Six Volkswagen executives were charged Wednesday with approving the carmaker’s plan to cheat U.S. air-pollution laws – and spending more than a year stonewalling investigators from the California Air Resources Board and the U.S. Environmental Protection Agency.

A federal grand jury in Michigan indicted the six executives on charges of conspiracy and fraud, alleging they masterminded a decadelong scheme to sell a generation of heavy-polluting vehicles as “clean diesel” cars. More than 500,000 were sold in the United States.

At the same time, the Justice Department in Washington announced that Volkswagen agreed to plead guilty as a corporation to criminal charges in connection with Volkswagen’s massive diesel scandal and would pay $4.3 billion in criminal and civil penalties. The California Air Resources Board said it had reached a settlement under which Volkswagen will pay the state $153.8 million in civil penalties.

Those payments are in addition to the more than $15 billion Volkswagen has agreed to pay to repurchase or repair the polluting vehicles, and to support clean-vehicle and pollution-mitigation programs in California and elsewhere.

“Volkswagen’s attempts to dodge emissions standards and import falsely certified vehicles into the country represent an egregious violation of our nation’s environmental, consumer protection and financial laws,” said U.S. Attorney General Loretta Lynch in announcing the criminal charges and the latest settlements.

Richard Corey, executive officer of the ARB, said the $153.8 million penalty covers violations of the state’s air-quality regulations. It’s also “an acknowlegement of the dogged persistence of (ARB) staff in tracking down, identifying and revealing VW’s massive cheating in this case and (ARB’s) determination to protect Californians’ public health and quality of life,” Corey said in a prepared statement.

The indictment said Volkswagen executives had their engineers begin designing “defeat device” software as far back as 2006 in an effort to introduce a fleet of clean-burning vehicles to U.S. customers. Jens Hadler, who was the head of engine development, authorized engineer Richard Dorenkamp to proceed with the plan “knowing that only the use of the defeat device software would enable VW diesel vehicles to pass U.S. emissions tests,” the indictment said.

In March 2007, the indictment said, Dorenkamp met with EPA officials to outline the design of Volkswagen’s new diesel engine. Later that month he reviewed the engine design with ARB officials in Southern California. Aside from receiving clearance from the EPA, carmakers have to get separate certificates for new vehicles from the ARB, which imposes air-pollution standards that are often tougher than U.S. standards.

The first cars with the rogue software were sold in the United States in 2009. The software switched off the air-pollution systems when the cars were on the open road, allowing the cars to emit 40 times more nitrogen oxide than what was permitted. NOx is a key component of smog.

The indictment said the scheme intensified after researchers from West Virginia University, in collaboration with engineers at the California Air Resources Board, found discrepancies between the cars’ NOx emissions on the road and in the California agency’s test lab in El Monte. The study’s results were presented to Volkswagen officials in spring 2014, and the indictment said company officials began lying to the California regulators about the source of the problem.

“In responding to questions, VW employees did not reveal that the existence of the defeat device was the explanation for the discrepancies in NOx emissions, and in fact gave (ARB) false reasons for the discrepancies in NOx emissions, including driving patterns and technical issues,” the indictment said.

Air Board spokesman David Clegern, reacting to the indictment, said Volkswagen pushed back against ARB’s investigators at every turn.

“Very early in the process VW questioned the quality of our equipment, the calibration of the equipment, the environmental conditions under which on-road tests were performed,” Clegern said in an email statement. “They also offered a series of alternatives to the origin of the discrepancies.”

The Justice Department, in a statement on the indictment, added that Volkswagen “continued this back-and-forth with the EPA and (ARB) for over 18 months, obstructing the regulators’ attempts to uncover the truth.”

It wasn’t until Sept. 3, 2015, that Volkswagen admitted to the presence of the software, during a meeting at the ARB lab in El Monte, according to the indictment.

Besides Dorenkamp and Hadler, the grand jury indicted Heinz-Jakob Neusser, the former head of brand development; Bernd Gottweis, a supervisor in quality management and product safety; Oliver Schmidt, former general manager of environment and engineering in Michigan; and Jürgen Peter, the head of quality management.

Schmidt was arrested last week in Miami. The other defendants are believed to live in Germany.

This story was originally published January 11, 2017 at 2:42 PM with the headline "Volkswagen execs indicted, accused of lying to U.S., California officials in diesel pollution scandal."