In announcing the charges and the plea bargain, Justice Department prosecutors detailed a large and elaborate scheme inside VW to commit fraud and then cover it up, with at least 40 employees allegedly involved in destroying evidence.
“Volkswagen obfuscated, they denied and they ultimately lied,” Attorney General Loretta Lynch said.
VW installed software in diesel engines on nearly 600,000 VW, Porsche and Audi vehicles in the U.S. that activated pollution controls during government tests and switched them off in real-world driving. The software allowed the cars to spew harmful nitrogen oxide at up to 40 times the legal limit.
U.S. regulators confronted VW about the software after university researchers discovered differences between testing and actual emissions. Volkswagen at first denied the use of the defeat device, but finally admitted it in September of 2015.
Even after that admission, prosecutors said, company employees were busy deleting computer files and other evidence.
The fine easily eclipses the $1.2 billion penalty levied against Toyota in 2014 over unintended acceleration in its cars.
The German company pleaded guilty to conspiracy, obstruction of justice and importing vehicles by using false statements. Under the agreement, VW must cooperate in the continuing investigation, which could lead to the arrest of more employees.
The automaker also agreed to the appointment of an independent monitor to oversee its compliance for three years.
Volkswagen previously reached a $15 billion civil settlement with environmental authorities and car owners in the U.S. under which it agreed to repair or buy back up to a half-million of the affected vehicles.
The six supervisors indicted by a federal grand jury in Detroit were accused of lying to environmental regulators or destroying computer files containing evidence.
All six are German citizens. Five remained in Germany and were not immediately taken into custody. The only one under arrest is Oliver Schmidt, who was nabbed over the weekend in Miami during a visit to the U.S.
Schmidt was in charge of VW’s compliance with U.S. environmental regulations. Those indicted also included two former chiefs of Volkswagen engine development and the former head of quality management and product safety.
All six were charged with conspiracy to defraud the U.S. by making false statements to regulators and the public. Three were also charged with fraud and clean-air violations.
Government documents say one engine development supervisor asked an assistant to search another supervisor’s office for a hard drive that contained emails between them. Then another assistant was asked to throw it away, prosecutors said.
According to the plea agreement, Volkswagen officials began deceiving the Environmental Protection Agency and other regulators starting in 2006, when they realized new diesel engines wouldn’t meet 2007 emissions standards.
Under the direction of supervisors, VW employees borrowed the defeat device idea from VW’s Audi luxury division, which was developing different engines with similar software.
In November 2006, some employees raised objections to the defeat device to the head of VW-brand engine development, prosecutors said. That official allegedly directed the employees to continue and warned them “not to get caught.”
In 2014, VW employees learned about a West Virginia University study that identified emissions discrepancies in VWs. Three of the supervisors and other employees decided not to disclose the defeat device to U.S. regulators, prosecutors said.
In August 2015, a VW employee ignored instructions from supervisors and told U.S. regulators about the device.
VW also faces an investor lawsuit and criminal probe in Germany. In all, 11 million vehicles worldwide were equipped with the software.
Judge denies bail for indicted Volkswagen executive
A Volkswagen AG executive indicted in the company's U.S. emissions scandal who was arrested in Miami while on vacation was denied release on bail Thursday by a judge who found it was too likely he would flee home to Germany.
Federal prosecutors urged the judge to order Oliver Schmidt, 48, held without bail until trial. They said if Schmidt were to return to Germany, there would be no way for the U.S. to extradite him because he is a German citizen.
U.S. Magistrate Judge William Turnoff agreed, noting that Schmidt faces potentially a long prison sentence — the maximum combined penalty for his conspiracy and fraud charges is 169 years — and that the U.S. case against him appears strong.
"I am concerned that he is a citizen of a country that does not have an extradition treaty with the United States," Turnoff said at a hearing.
Schmidt and five other Volkswagen executives were charged Wednesday in an indictment released in Detroit with playing key roles in VW's scheme to knowingly sell nearly 600,000 diesel vehicles that did not meet U.S. pollution emissions standards. The scheme involved software that produced acceptable emission levels in U.S. environmental tests but much higher amounts when the vehicles were driven on the roads.
The company itself has agreed to plead guilty and pay a record $4.3 billion criminal penalty. According to a plea agreement, the company first began deceiving the Environmental Protection Agency and California state regulators in 2006.
Schmidt is the only indicted executive in U.S. custody, with the others remaining in Germany. He was general manager of a VW environmental engineering office in Auburn Hills, Michigan, from 2012 to 2015, court papers show.
During that time, the documents say, Schmidt and others actively deceived regulators about the vehicle emissions and he later deleted documents relevant to the subsequent investigation despite company warnings to preserve them.
Justice Department trial attorney Ben Singer also said Schmidt also was deceptive when he voluntarily met with FBI agents in London, England, in November 2016.
"Mr. Schmidt, when he met with us, lied to us," Singer said.
Schmidt's attorney, David Massey, said he will again seek Schmidt's release on bail when he goes to federal court in Detroit, where the case will be set for trial. Massey said Schmidt has no intention of fleeing the U.S., maintains his innocence and is willing to give up his passport and other identification papers if released on bail and house arrest.
Massey noted that before his arrest, Schmidt had flown with his wife from Germany to Miami and the couple then visited Cuba while knowing he was under U.S. investigation. They returned to Miami and spent the December holidays with friends before he was taken into custody on Saturday at Miami International Airport just before he was to fly home.
Schmidt was unaware when he traveled to the U.S. that he faced possible arrest and federal authorities were notified that he was in this country, Massey said.
"He has shown a willingness to submit to the jurisdiction of the United States," Massey said. "He's not going to try (to flee). He knows he'd get caught."