‘Regrettable’ lawsuits
“It is regrettable that some states have decided to sue for environmental claims now, notwithstanding their prior support of this ongoing federal-state collaborative process,” Jeannine Ginivan, a spokeswoman for the carmaker, said in a statement. She declined to comment on allegations dating back to 1999.
The new allegations that cheating extended over a longer period “reveal a culture of deeply rooted corporate arrogance, combined with a conscious disregard for the rule of law or the protection of public health and the environment,” said New York Attorney General Eric Schneiderman.
“This cover-up was deep, wide and long-lasting. It extended from front-line engineers throughout the corner offices … and right into the CEO suites,” Schneiderman said, adding that the “toxic corporate culture that produced this fraud must be stopped.”
“Substantial penalties must be imposed on the Volkswagen companies, above and beyond the amount they have to pay to make American consumers whole,” he said.
Mueller ‘in loop’
Winterkorn’s successor, Matthias Mueller, became aware of the defeat device in 2006 while head of project of management at Audi, according to the New York complaint. The suits did not state Mueller was aware of the violations.
Schneiderman told reporters that Mueller “was made aware of some aspects of this problem” and that “he clearly was in the loop.” A VW spokesman in Germany called the accusations about Mueller “unfounded.”
VW’s Audi and Porsche units, as well as their U.S. divisions, are named as defendants in the lawsuits. Maryland Attorney General Brian Frosh said penalties against the company might run into the hundreds of billions of dollars.
Michael Weinstein, a former Justice Department attorney who is now a white-collar defense lawyer at Cole Schotz PC, said it’s likely federal prosecutors are reading the states’ complaints very closely.
“From the allegations, this appears to be a large scale, deeply embedded wholesale fraud brought by the company against the public and the government,” Weinstein said. “Schneiderman’s complaint includes many high ranking executives as well as senior management that — if he can tie them in directly through emails or testimony — creates tremendous problems for them and the company as a whole.”
Audi fix
VW’s efforts to evade emissions laws dates back to 1999, when the Audi division tried to lower nitrogen oxide output to be able to sell large luxury cars with 3.0-liter, six-cylinder diesel engines in Europe. Audi’s engineers developed technology to eliminate the traditional, disagreeable clattering sounds from the diesels by injecting additional fuel into the engine, but that caused the engine to exceed emissions standards, according to the complaint.
“In 1999, Audi used a defeat device to solve the problem during testing,” New York said. Audi referred to the defeat device as “the acoustic function” when it deployed the software in diesel cars in Europe from 2004 to 2008, according to Schneiderman’s office. The fix used software that detected when testing was being conducted — based on the lack of steering wheel movement — and deactivated the fuel injection.
VW engineers decided to adopt the Audi technology to meet tough U.S. emissions standards in 2006, according to the state lawsuits. The engineers couldn’t figure out how to make the company’s lean-NOx traps work for reducing nitrogen oxides without producing so much soot that they clogged an emissions-control filter after 50,000 miles (about 80,500km) — far sooner than the 150,000-mile standard mandated in the U.S. Under a management-imposed deadline and “with the knowledge and approval of their managers,” the engineers adapted the Audi software, the attorneys general said.
There were six variations of the defeat device installed by VW and Audi starting in 2008, with Porsche implementing them later, according to Schneiderman’s office. VW used the devices even after U.S. environmental regulators began looking into the software to determine its purpose, according to the complaint.
Evidence destroyed
When regulators started asking questions, several VW employees destroyed incriminating evidence after they were tipped off by a senior in-house lawyer in Germany and then repeatedly failed to disclose to regulators the true reason for the discrepancies, according to the New York and Maryland complaints.
Winterkorn and VW’s former global head of marketing, Christian Klingler, knew by spring 2014 of the existence of defeat devices and “did nothing to prevent both Audi and Volkswagen from repeatedly deceiving regulators,” the New York lawsuit stated.
Schneiderman said “clean and green” was the center of VW Group’s false-marketing efforts in the U.S., including a Super Bowl ad highlighting its diesel vehicles’ environmental friendliness, in one of the most-watched television commercials in the U.S., Schneiderman said called the scam “appalling.”
Sham recalls
VW tried to cover up the problem through sham recalls that the company knew wouldn’t meet the required standards and then only confessed to the defeat devices “when they knew the regulators had the goods on them,” according to Schneiderman’s statement.
Schneiderman’s press conference included a blow-up poster of an internal email to Mark Gillies, a spokesman for VW in the U.S. from Oliver Schmidt, director of VW’s environmental and engineering office in August of 2014. “[Audi’s] V-6 has exactly the same issue [as VW diesels], but not public yet. They have not been caught,” the email read.
“These actions highlight how stubborn and unrepentant the culture at Volkswagen is that gave rise to the systematic cheating and deception described in this complaint,” New York says in the complaint.
In one 2014 e-mail obtained by New York investigators, Winterkorn was told by Frank Tuch, director of VW Group quality management, “A thorough explanation for [high] emissions cannot be given to authorities.”
VW admitted in September to using the defeat devices, allowing almost 600,000 vehicles in the U.S. to run on the road while emitting up to 40 times more pollutants than permitted under U.S. law.
The company last month agreed to pay $15.3 billion to settle U.S. federal litigation and charges lodged by 44 U.S. states that the company violated consumer fraud laws. The company is also the target of potentially costly criminal probes in the U.S., Germany and South Korea.
VW has said it installed improper software that deactivated pollution controls on more than 11 million diesel vehicles sold worldwide by group brands.
