VW’s $4.3 Billion U.S. Deal Completed With Court’s Approval

Volkswagen AG will pay a $4.3 billion penalty for misleading U.S. regulators and customers about its diesel engines’ emissions after a federal judge approved the company’s plea deal, moving the carmaker closer to resolving one of the biggest scandals in automotive history (United States v. Liang, E.D. Mich., 16-cr-20394, plea deal approved 4/21/17).

U.S. District Judge Sean Cox in Detroit signed off April 21 on the plan for the German carmaker to pay $2.8 billion in criminal fines as part of a settlement with the U.S. government that also includes $1.5 billion in civil penalties and a guilty plea. The judge also approved a three-year probation overseen by an independent monitor, Larry Thompson, who prosecuted Enron Corp. while at the U.S. Justice Department and most recently was chief counsel at PepsiCo Inc.

“This is a case of deliberate, massive fraud perpetrated by Volkswagen,” Cox said. He said it was still unclear how far up the ranks of the company the criminal conduct went. He urged U.S. and German investigators to “find those responsible for this deliberate, massive fraud that damaged an iconic auto company.”

The approval of the sentence turns the final page on the criminal probe of the company in the U.S. VW admitted in September 2015 that it had rigged as many as 11 million diesel vehicles worldwide with so-called defeat devices to cheat on emissions tests. The company has set aside 22.6 billion euros ($24.2 billion) to cover cheating-related expenses, with the largest share going to compensate consumers who sued in the U.S.

`It Was Wrong’

Volkswagen “deeply regrets the behavior that gave rise to this case,” the company’s general counsel, Manfred Doess, told the judge. “Plain and simple, it was wrong. We let people down and for that we are deeply sorry.”

He said the company is taking steps to ensure that something like this never happens again. “Volkswagen is not the same company it was 18 months ago,” he said.

The company isn’t out of the woods. Still pending are investor lawsuits in the U.S. and Germany and consumer suits in Germany and the U.K. There are also criminal investigations in Germany and the U.S., where seven executives have been charged. Prosecutors around the world are pressing forward with those probes.

VW spokesman Nicolai Laude said April 21 that some of the executives who have been charged are still employed by the company and some are no longer there. He declined to specify numbers or why some left, citing privacy rules.

Cox rejected a request by some VW car owners that he order restitution for losses caused by the company’s fraud. Because the plea deal didn’t allow for such restitution, Cox cited the burden it would place on the court and a consumer restitution plan that’s already in place.

Settlements

VW reached a $14.7 billion settlement with owners and leasers of affected 2-liter diesel engines and is paying another $1 billion to cover 3-liter vehicles equipped with so-called defeat devices.

Last month, VW pleaded guilty in Detroit federal court to conspiring to defraud regulators, obstruction of justice and making false statements. Cox said then that he needed “more time to reflect and study’’ before deciding on what the company’s sentence should be.

Cox had harsh words for VW on April 21. “Who’s been hurt by this corporate greed?” Cox asked. “Not the managers at Volkswagen, the ones who get paid high salaries and large bonuses. As always, it’s the little guy, the Volkswagen laborer working on the line.”

John Neal, an assistant U.S. attorney in Detroit, said that VW’s criminal plea was “a very significant benefit to the public and a significant aspect to this resolution.”

With assistance from Steven Raphael and Karin Matussek

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Sara Forden at sforden@bloomberg.net

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