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Ahead of the Curve Auto Supplier Blog

April 27, 2017

Volkswagen AG to Pay $2.8 Billion in Criminal Fines Related to Emissions Scandal

On April 21, 2017, United States District Judge Sean Cox of the Eastern District of Michigan ordered that Volkswagen AG pay $2.8 billion in criminal fines stemming from the emissions scandal uncovered in 2015, which was discussed in a previous post. The scandal began after the automaker was accused of conspiring to defraud the government, commit wire fraud and violate the Clean Air Act in order to obtain necessary air quality emission certificates to sell certain vehicles in the United States. According to the government’s three-count third superseding information, from May 2006 to approximately November 2015, Volkswagen AG conspired to deceive government regulators and customers about whether certain vehicles complied with United States emissions standards. The information further alleged that, all along, Volkswagen AG knew that the vehicles did not meet these standards and the automaker conspired to use software in order to cheat the testing process. The government also charged Volkswagen AG with obstruction of justice, alleging that it had destroyed business records related to the emissions scandal and with entry of goods by false statement.

On March 10, 2017, Volkswagen AG entered a guilty plea to all three counts. Although the plea agreement noted that the criminal fine could range anywhere from $17 billion to $34 billion, the parties agreed that Volkswagen AG would pay a criminal fine in the amount of $2.8 billion within 10 days of judgment. At the conclusion of the March 10 hearing, the court set a sentencing hearing for April 21, 2017.
At the April 21, 2017, sentencing hearing, the court permitted alleged victims to express their positions concerning restitution. In the end, the court chose not to award restitution to the victims because the complexity of the issues related to the cause and amount of losses would complicate or prolong the sentencing process. The court accepted the parties’ plea agreement and ordered that Volkswagen AG pay $2.8 billion within 10 days of the judgment. The auto-maker was further sentenced to three years of probation.

The conclusion of the government’s criminal case against Volkswagen AG triggers an important reminder for all in the industry—a culture of transparency with clear internal reporting and investigation procedures may wind up saving your company billions in legal fines. For help crafting effective internal reporting procedures or for assistance with an internal investigation, please contact a member of Warner Norcross & Judd’s automotive industry group.

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