Diesel Cheating Update: Volkswagen Execs Arrested, Renault Under Suspicion

The plot of the Volkswagen diesel cheating scandal just keeps getting thicker. After agreeing to civil settlements in the US that will cost the company as much as $20 billion, the Justice Department last week unsealed indictments from a Michigan grand jury accusing 6 mid-level Volkswagen managers of conspiracy to defraud the US, violations of the Clean Air Act, and wire fraud.

Volkswagen TDI engine

“This conspiracy involved flesh-and-blood individuals who used their positions within Volkswagen to deceive both regulators and consumers,” US Deputy Attorney General Sally Yates said in a prepared statement. “From the start of this investigation, we’ve been committed to ensuring that those responsible for criminal activity are held accountable.”

That may be true, but some people are wondering aloud why people who crashed the global economy, destroyed trillions in wealth, and caused millions to lose their homes were allowed to go scot-free, golden parachutes in hand, while junior car company executives are getting hammered. It’s a fair question.

“They’ve been criticized for years for not doing enough to hold individual executives within companies personally responsible,” says Timothy Heaphy, a former US Attorney and the chair of white collar defense at Hunton & Williams. DOJ now sees the Volkswagen case as a chance to test drive its new “get tough” policies. “That’s why they’re going hard on individuals,” Heaphy says.

In a surprise move, Volkswagen notified its executives recently not to travel to the US for fear of being arrested. If found guilty, the violations carry penalties of up to 20 years in prison. 5 of the indicted people have traveled back to Germany, but Oliver Schmidt, who for many years was the public face of Volkswagen in North America, was arrested just days ago at Miami International Airport.

Germany has an extradition treaty with the US, which raises the prospect of a titanic political struggle between Germany and the US. Donald Trump’s pick for US Attorney General, Jeff Sessions, “has a history of being tough on white collar crime, once comparing Criminal Executive Officers to drug dealers,” according to Heaphy.

Also, as part of the plea deal the company entered into with the Justice Department, Volkswagen is required to help in the prosecution of wrongdoers. So much for looking to the company to provide aid and comfort in a time of need.

From this point forward, the prosecution of this case will resemble what goes on in any drug case. These relatively low level executives will be “encouraged” to roll over and spill the beans on higher ups.

A CNBC report quoting the New York Times claims the written settlement Volkswagen signed includes references to ”Supervisor B” who overruled nervous subordinates and told them to finish developing the illegal software. “Don’t get caught”, he allegedly told them. There is also a reference to  ”Attorney A,” who reportedly told co-workers to destroy any emails that mentioned the ”acoustic function” — internal Volkswagen code for the emissions cheating software.

Eventually, the trail could lead all the way to the door of Martin Winterkorn, the head of Volkswagen who stepped down as soon as the diesel cheating scandal broke. Winterkorn is something of a national folk hero in Germany, where he is regarded as that country’s top engineer. Getting him extradited, if it comes to that, will really set the fox among the chickens.

Meanwhile, across The Pond, French officials are accusing Renault of using hardware defeat devices to cheat on its own diesel emissions tests. The Volkswagen cheating relied on software based work arounds. According to a report in Le Figaro and picked up by AutoBlog, three French judges will now investigate the allegations.

Last fall, the University of Applied Sciences in Bern, Switzerland, and the International Council on Clear Transportation alleged that emissions from the Renault Espace — the French equivalent of the Chrysler Town & Country — had pollution levels 25 times higher than permitted. The ICCT was directly involved in bringing the diesel cheating at Volkswagen to light.

A separate group performed independent tests on 52 vehicles from  Citroen, Peugeot, Renault, Toyota, Ford, and others. It found that most exceeded the legal limit by some degree. French regulations permit a tolerance of 2.1 times the established limit.

Renault, of course, is shocked at the accusations, and promises to clear its name after a full and fair investigation. It says the test used by ICCT are not the same as the ones used by French authorities and the results are like comparing Camembert to chevre.

That may be so. But what remains virtually certain is that using diesel engines in automobiles may go down as one of the dumbest experiments in human history. Fortunately, the antidote is on the horizon — clean, non-polluting electric cars. Vive la revolution! 

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.