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U.S. Justice Department Puts Heat on Audi and VW

In an effort to prosecute those involved in the recent “Dieselgate” emissions scandal, U.S. Federal Investigators are aggressively going after lower-level executives of Audi and VW. Because Germany does not have extradition laws, it has proven difficult for the U.S. Department of Justice to bring cases against German senior executives. The accusations are serious and range from violation of the Clean Air Act to falsifying information. In certain cases, sentences could exceed 100 years. The following New York Times articles are interesting because they explain and clarify the complex issues facing U.S. prosecutors in this historic case.


Volkswagen Executive to Plead Guilty in Diesel Emissions Case

A Volkswagen executive accused of helping to cover up the automaker’s diesel emissions fraud has agreed to plead guilty in federal court next week, a development that could bolster the Justice Department’s efforts to prosecute individuals involved in the scandal.

On Tuesday, lawyers for the executive, Oliver Schmidt, a German who was arrested in Miami in January, told a judge for the Eastern District of Michigan that their client had decided to enter a guilty plea at a hearing scheduled for Aug. 4.

Mr. Schmidt, 48, former head of Volkswagen’s environmental and engineering center in Auburn Hills, Mich., has been accused of knowingly providing false information to American regulators who became suspicious about the emissions of Volkswagen diesel vehicles in early 2014.

The following year, Volkswagen admitted that it had rigged diesel models with software — known as a defeat device — that enabled the vehicles to pass emissions tests even though the vehicles were spewing far more pollutants outside testing labs. More than 11 million cars worldwide were equipped with the software, including 600,000 in the United States.

Volkswagen later pleaded guilty to charges of conspiracy to commit wire fraud and to violate the Clean Air Act, customs violations and obstruction of justice.

The automaker has also agreed to pay $4.3 billion in civil and criminal penalties in the case brought by the Justice Department — part of $22 billion in settlements and fines Volkswagen is paying out in the United States, making it one of the costliest corporate scandals in history.

Mr. Schmidt’s cooperation would be a coup for the Justice Department’s case against Volkswagen. Mr. Schmidt is one of eight former Volkswagen executives who have been charged in the United States. The others are in Germany, and almost all are unlikely to face trials in the United States because Germany does not extradite its citizens.

Volkswagen declined to comment on Mr. Schmidt’s plea agreement but said in a statement that it “continues to cooperate with investigations by the Department of Justice into the conduct of individuals.”

Mr. Schmidt is facing 11 felony counts and a maximum sentence of 169 years in prison. It is unclear to which charges he will plead guilty. Both his attorney, David DuMouchel, and a spokeswoman for the United States attorney for the Eastern District of Michigan declined to comment. It is also unclear if he will agree to cooperate with prosecutors as a condition of his plea, although that is typical in such agreements.

Previously, Mr. Schmidt’s lawyers had indicated in court documents that they planned to argue that he was a minor player in the emissions fraud and had been misled by more senior executives and lawyers at Volkswagen.

Another former Volkswagen executive, James Robert Liang, has pleaded guilty to charges including conspiracy to defraud the United States government and to violate the Clean Air Act. Mr. Liang, who worked at a Volkswagen testing center in Oxnard, Calif., is cooperating with investigators and is awaiting sentencing.

Earlier in July, an Italian, Zaccheo Giovanni Pamio, who was head of thermodynamics in the engine development department at Volkswagen’s Audi division, was arrested by German authorities in Munich. His arrest was the first on German soil related to Volkswagen’s emissions fraud. Because he is not a German citizen, it is possible Mr. Pamio will be extradited to the United States.


Arrest of Former Audi Executive Highlights VW Investigators’ Strategy

FRANKFURT — United States investigators are continuing to pursue wrongdoing in Volkswagen’s emissions deception, charging a former manager at the carmaker’s Audi luxury car division who has been arrested in Germany.

The case against Zaccheo Giovanni Pamio, who was head of thermodynamics in Audi’s engine development department, presents a rare opportunity to bring a suspect to trial in the United States.

Most of the accused former managers are safe in Germany because it does not extradite its citizens. But Germany is not necessarily a refuge for Mr. Pamio because he is Italian.

Mr. Pamio, the eighth former Volkswagen executive to be charged by the United States government, was arrested by Munich authorities this week. His arrest is the first on German soil related to Volkswagen’s emissions fraud.

Mr. Pamio was a relatively small player in what is alleged to be a conspiracy to dupe American regulators and consumers. But his arrest appears to be part of a strategy by federal investigators to pressure lower level employees to testify against their superiors.

“They want names, and they want top managers,” said Annette Voges, a Hamburg lawyer who represents Heinz-Jakob Neusser, a former head of engine development at Volkswagen who is also a suspect in the case.

The case by American authorities, filed in Detroit on Thursday, implies that Mr. Pamio acted under internal pressure and that he informed at least one senior manager about wrongdoing at Audi. The complaint could reinforce the widespread view that Volkswagen’s unforgiving corporate culture caused the scandal In September 2015, Volkswagen was accused of evading emissions standards in the U.S. The scandal has hit the company hard.

In September 2015, Volkswagen was accused of evading emissions standards in the U.S. The scandal has hit the company hard.

Beginning in 2006, Mr. Pamio helped find a way to evade clean air standards in the United States after other departments at Audi refused to allocate enough room in the car for the necessary pollution equipment, according to the complaint. The space was needed in part for a high-end sound system, the complaint said.

In 2013, Mr. Pamio prepared a presentation for a member of Audi’s management board, who was not identified. The presentation, according to the complaint, described in detail how the engine software could be programmed to deceive regulators about a car’s emissions.

Terry Brennan, a Cleveland lawyer representing Mr. Pamio, declined to comment.

Andrea Grape, a spokeswoman for Munich prosecutors, confirmed Friday that a suspect was being held in connection with an investigation of Audi’s role in the cheating scandal. She did not identify the suspect in accordance with German privacy laws. A person close to Mr. Pamio confirmed widespread German media reports that he is the person being held.

Unlike the other executives charged in the scandal, Mr. Pamio, 60, worked primarily for Audi, a situation that could focus more attention on the brand.

Audi engineers were the first to figure out how to use software to cloak excess emissions, according to court documents. Volkswagen later adopted the technology to meet American limits on nitrogen oxides, which cause lung ailments and urban smog.

The luxury car division, which accounts for a disproportionately large share of the carmaker’s profits, has not suffered as much damage to its reputation as the Volkswagen brand. Audi said Friday that sales in the United States rose 6.2 percent in the first half of 2017 to 103,000 cars, a record.

Volkswagen pleaded guilty to United States charges in March and agreed to pay penalties and civil settlements of more than $22 billion. Despite the plea, the company has continued to insist that top management was unaware of the wrongdoing.

Volkswagen admitted that 11 million of its vehicles were equipped with software that was used to cheat on emissions tests. This is how the technology works and what it now means for vehicle owners.

Rupert Stadler, the chief executive of Audi since 2007, has clung to his job even though his office has been searched by investigators and despite criticism that he should take responsibility for wrongdoing that occurred on his watch. Audi declined to comment Friday.

Mr. Pamio was indicted after a lull in the case, a sign that investigators in the United States are continuing to pursue suspects. Little public activity had occurred in the Volkswagen investigation since the indictments of six other former managers were made public in January.

Until this week, only one other suspect was in custody in Germany or the United States. Oliver Schmidt, a German who previously handled Volkswagen’s relations with American regulators, was arrested in Miami in January and is being held in Michigan. He is accused of feeding false information to officials in an ultimately futile attempt to prevent them from discovering Volkswagen’s fraud.

Another former Volkswagen executive, James Liang, has pleaded guilty to charges including conspiracy to defraud the United States government and to violate the Clean Air Act. Mr. Liang, who worked at a Volkswagen testing center in Oxnard, Calif., is cooperating with investigators and is awaiting sentencing.

According to the complaint against Mr. Pamio, Audi resorted to cheating after it became clear that cars with 3-liter motors needed a larger tank to hold a chemical solution known as AdBlue that was used to scrub harmful nitrogen oxides from the exhaust.

That presented a quandary. A larger tank would rob space needed for the luxury sound system. But a smaller tank would require more frequent refills, an inconvenience that Audi feared would deter buyers. So the cars were designed to ration AdBlue — and pollute more than allowed — unless software in the car detected the telltale signs of an emissions test.

In 2008, Mr. Pamio appeared in a video in which he offered assurances that the AdBlue tank would need to be refilled only when the car was due for an oil change. “The refilling is planned at a minimum after 10,000 miles, during the oil change interval,” Mr. Pamio told the Driving the Nation website.

He was shown standing next to an Audi sedan with stenciling on the door that read, “The cleanest diesel in the world.”

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