Executive Arrested
Volkswagen Executive Arrested.
Article in the WSJ. Sorry not enough posts for me to add the link.
A Volkswagen AG executive was arrested and charged in connection with the German auto giant’s emissions-cheating scandal, the second person publicly accused by Washington of participating in a broad conspiracy to defraud the U.S. government and Volkswagen customers, according to a complaint unsealed Monday.
The U.S. Federal Bureau of Investigation arrested the executive, Oliver Schmidt, on Saturday, and on Monday he appeared in federal court in Miami where his attorneys argued with a prosecutor about whether Mr. Schmidt posed a flight risk and should be detained.
U.S. Magistrate Judge William Turnoff decided Mr. Schmidt would remain temporarily detained without bond and scheduled another hearing for Thursday afternoon. Mr. Schmidt, who appeared in handcuffs and shackles and wearing a tan jail jumpsuit and glasses, was then led out of the courtroom.
The charges come as Volkswagen seeks to settle criminal allegations stemming from its admission in 2015 that it rigged nearly 600,000 diesel-powered cars sold in the U.S. to cheat on emissions tests. Volkswagen has agreed to pay up to $17.5 billion in the U.S. to settle claims with regulators, consumers, dealers and state attorneys general and could face another multibillion-dollar penalty in the expected criminal case.
Mr. Schmidt couldn’t be reached via email or his mobile phone for comment.
Volkswagen’s North American chief, Hinrich Woebcken, said he and other executives were “surprised” by news of Mr. Schmidt’s arrest. “We all heard about it from the media,” he said in an interview at the North American International Auto Show in Detroit Monday.
Mr. Schmidt served as head of Volkswagen Group of America’s Engineering and Environmental Office in Ann Arbor, Mich., from 2014 to early 2015. He is still an employee of Volkswagen, based in Wolfsburg, Germany.
According to the complaint, Mr. Schmidt played a central role in the decision to keep U.S. authorities in the dark about VW’s use of cheating software, a so-called defeat device, to gain certification of model-year 2016 vehicles.
Mr. Schmidt allegedly offered “technical reasons and excuses such as ‘irregularities’ or ‘abnormalities’ for the discrepancy” without revealing the software he knew was specifically designed to evade emissions tests, the complaint said.
Senior Volkswagen officials were involved in preparations for that meeting and authorized employees to hide information from regulators, the complaint said. Michael Horn, former CEO of Volkswagen Group of America, testified in a Congressional subcommittee on Oct 8, 2015, that he was told by U.S. employees in July of that year that federal and California environmental regulators wouldn’t certify the company’s 2016 vehicles because of the “emissions issue.”
According to the complaint, Mr. Schmidt then played a key role in preparing a meeting in Wolfsburg—internally known as the “damage conference”—at which VW executives discussed the defeat devices, the consequences for the company and the decision to continue misleading U.S. authorities.
Mr. Schmidt and other VW employees informed attendees that “U.S. regulators were not aware of the defeat device,” the complaint said. “Rather than advocate for disclosure of the defeat device to U.S. regulators, VW executive management authorized its continued concealment.”
The complaint also alleged that Mr. Schmidt knew of problems in 2014.
Upon learning of a study at West Virginia University that unearthed the discrepancies in March 2014, Mr. Schmidt allegedly wrote a colleague: “It should first be decided whether we are honest. If we are not honest, everything stays as it is,” according to the complaint.
In the aftermath of that study, regulators in California and at the Environmental Protection Agency “repeatedly” asked Volkswagen questions that became “increasingly more specific and detailed,” and conducted their own testing, the complaint said.
Volkswagen employees pursued a strategy of concealing the defeat device while “appearing to cooperate” and offered software and hardware “fixes,” the complaint said.
Mr. Schmidt doesn’t currently have a plea agreement with the U.S. Justice Department, one person familiar with the case said.
Mr. Schmidt’s arrest follows the indictment last year of James Liang, a veteran Volkswagen engineer who pleaded guilty to conspiring with other Volkswagen employees to defraud the U.S. through the diesel cheating. Mr. Liang hasn’t been sentenced, pending his assistance in the federal investigation. The complaint Monday describes two additional unidentified cooperating witnesses who worked in Volkswagen’s engine development department and won’t be prosecuted in the U.S.
One of the witnesses “fully briefed” Mr. Schmidt on the defeat device in preparation for a July 2015 meeting, according to the complaint. A slide prepared by Mr. Schmidt and others described possible scenarios, according to the complaint: “if the outcome was ‘negative for VW’ and there was ‘no explanation for’” the issues, “there could be an ‘Indictment?’ ” the slide read.
The cheating dates back to 2006, prosecutors said, when Volkswagen employees determined they couldn’t design a diesel engine that would meet emissions standards and attract enough U.S. customer interest. Instead, the employees designed software to cheat on the emissions tests, prosecutors said.
