DIESELGATE: WHAT YOU NEED TO KNOW

The scope of the fraud perpetuated by Volkswagen on the American government and the American people is truly stunning.  For the better part of a decade, the German automaker sold nearly 600,000 vehicles that were marketed as being environmentally friendly.  The truth was that they emitted up to 40 times the legally allowable amount of Nitrous Oxide into the air we all breathe, a fact that was concealed by sophisticated software whose only purpose was to cheat on emissions tests. 

THE ORIGIN OF THE SCANDAL

In 2006, Volkswagen engineers discovered that the new diesel automobiles they planed to manufacture and distribute for the American market could not meet U.S. emissions standards.  Diesel cars are capable of getting significantly better gas mileage than cars that run on conventional gasoline, but they produce much more nitrous oxide.  A chemical called AdBlue can lessen the nitrous oxide emissions.  But the engineers discovered that the storage containers they had designed for the AdBlue weren’t large enough.  They had a choice: they could either make the cars’ sound system a little smaller to come up with more space to hold the AdBlue, or they could come up with another solution. 

The solution they came up with was to commit fraud on a massive scale.  The company designed “defeat devices.”  The cars could sense when they were being subjected to state and federal emissions standards, and they modified their performance so they could comply with the test.  All of the rest of the time the cars spewed as much as forty times the legally allowable amount of nitrous oxide into the air we all breathe.

THE SCOPE OF THE DECEPTION

This wasn’t a mistake and it wasn’t short term.  Volkswagen began selling cars including defeat devices in the U.S. in 2008, and didn’t stop until the news that they had been caught in September of 2015.  All told, they sold nearly 600,000 cars in our country, and armed over 11 million cars with defeat devices worldwide. 

THE COVERUP

The Environmental Protection Agency and the California Air Resources Board approached Volkswagen about the emissions results in May of 2014.  For over a year, Volkswagen insisted that the flaws were the result of technical glitches, and not the result of a deliberate scheme to evade emissions requirements. 

THE PUNISHMENT

Volkswagen pled guilty to charges of conspiracy to commit wire fraud, conspiracy to violate the Clean Air Act, customs violations, and to obstruction of justice in January of 2017.  To date, the fines and settlements Volkswagen has agreed to pay to settle the various criminal and civil suits brought against the firm have had a total price tag of nearly $30 billion, a record for an automaker. 

THE $10 BILLION QUESTION: WHEN DID VW’S EXECUTIVES KNOW?

But Volkswagen’s exposure to the Dieselgate scandal is not behind it.  The $10 billion question is what the company’s top executives knew about Dieselgate, and when.  Under German law, they had a fiduciary duty to tell their stockholders of anyinformation that could threaten the company’s fiscal health.  Their top executives have claimed that they were not aware of the scandal, but reporting has indicated that it was the subject of a November 2007 executive meeting attended by both the former and current CEO.  Oliver Schmidt, the former head of Volkswagen’s engineering and environmental office in America, was sentenced to a seven-year prison term in December of 2017.  In a pre-sentencing letter, Schmidt shared that the misleading information he had shared with U.S. emissions regulators had been approved by management level supervisors at VW, and that he had been “misused by his own company.”