The Justice Department challenged the German automaker Volkswagen in federal court Monday, saying that the company installed illegal devices in nearly 600,000 diesel engine systems to impair emissions controls, that way increasing harmful air pollution.
But at least for now, federal prosecutors have stopped short of criminal charges and did not single out individual executives.
The civil complaint, filed in Detroit, comes after Volkswagen admitted in September that it had installed software designed to cheat on emissions tests in 11 million of its diesel vehicles worldwide, setting off one of the largest corporate scandals in the auto industry’s history.
Since then, the company’s chief executive officer, Martin Winterkorn, has resigned, nine employees have been suspended, and the company has begun the twin tasks of designing fixes for the vehicles and containing consumer outrage and litigation.
Regulators across the globe, including in India, South Korea and Germany, are conducting investigations, as are attorneys general in all 50 states. The Justice Department had been seen as the only agency that might hold executives personally accountable.
“With today’s filing, we take an important step to protect public health by seeking to hold Volkswagen accountable for any unlawful air pollution, setting us on a path to resolution,” said Cynthia Giles, assistant administrator for the Environmental Protection Agency’s Office of Enforcement and Compliance Assurance. “So far, recall discussions with the company have not produced an acceptable way forward. These discussions will continue in parallel with the federal court action.”
But given the cascade of revelations, the civil complaint, which does not involve criminal charges or auto executives facing charges, is something of a blow to the Obama administration’s highly promoted new strategy for getting tough on corporate crime. The Justice Department has gained a reputation in recent years for forcing companies to pay big fines, while sparing the executives involved. In September, Deputy Attorney General Sally Q. Yates said that impression had weakened public confidence and vowed to change it.
“Corporations can only commit crimes through flesh-and-blood people,” Yates said as she announced the new policy, which encouraged prosecutors to set their sights on prosecuting corporate executives from the beginning of investigations.
Two weeks later, the Justice Department opened its investigation into Volkswagen.
The government is seeking an array of penalties against the company, including fines and further actions to mitigate the emission of harmful pollutants. The complaint does not specify actions the company must take to further reduce emissions, nor does it name a dollar figure for the penalty. Those will be decided by a federal court.
Under the Clean Air Act, the company could be fined up to $32,500 for each of the about 499,000 2-liter diesel vehicles in which it installed the software and up to $37,000 for each of the 85,000 3-liter vehicles in which VW installed the software, leading to a maximum penalty of more than $19 billion.
Justice Department officials said that the complaint represented the first step in legal action against Volkswagen and did not preclude a criminal charge.
“Today’s complaint is the first stage in bringing Volkswagen to justice for failing to disclose the defeat device while seeking certification for its diesel vehicles from EPA,” said Barbara L. McQuade, the U.S. attorney for the Eastern District of Michigan. “The alleged misrepresentations allowed almost 600,000 diesel engines to emit excessive air pollution across the country, harming our health and cheating consumers.”
The decision to cheat was made a decade ago as the company began a major push to bring diesels to the United States, the chairman of the company’s supervisory board, Hans-Dieter Poetsch, acknowledged last month. However, the company’s technology was not sufficient to keep up with toughening emissions standards for smog-forming pollutants, particularly in the United States.
A pivotal episode came in 2006 and 2007, when Volkswagen initially decided to forge a partnership with BMW and Daimler to jointly pursue technology to mitigate diesel emissions. But after a management shake-up at Volkswagen in early 2007, the partnership was abandoned, and Volkswagen decided to use its own technology.
One key figure in the scandal is Wolfgang Hatz, who was promoted in early 2007 to lead engine and transmission development for Volkswagen, which includes such brands as Audi, Porsche and Lamborghini. A few months after taking over, Hatz was filmed complaining about the expectations of the California Air Resources Board, which at the time was proposing sharp new limits on global warming gases released by automobiles.
“We can do quite a bit, and we will do a bit, but ‘impossible’ we cannot do,” Hatz said at the time.
“From my point of view, the CARB is not realistic,” he said of the air resources board. Hatz is among the employees suspended.