VW pleads guilty in emissions scandal; 6 employees indicted

The VW sign of Germany's Volkswagen car company is displayed at the building of a company's retailer in Berlin Oct. 5, 2015.
Markus Schreiber | AP 2015

Six high-level Volkswagen employees have been indicted by a grand jury in the company's emissions cheating scandal, as the company admitted wrongdoing and agreed to pay a record $4.3 billion penalty.

In announcing the federal indictments and plea deal Wednesday in Washington, the Justice Department detailed an elaborate and wide-ranging scheme to commit fraud and then cover it up. At least 40 VW employees were involved in destroying evidence, the government said.

The penalty against the company is the largest ever levied by the government against an automaker, eclipsing the $1.2 billion fine against Toyota in 2014 over safety issues related to unintended acceleration.

VW installed software into diesel engines on nearly 600,000 vehicles in the U.S. that allowed the engines to turn on pollution controls during government tests and switch them off in real-world driving. The software, called a "defeat device" because it defeated the emissions controls, improved engine performance but spewed out harmful nitrogen oxide at up to 40 times above the legal limit.

U.S. regulators confronted VW employees about the use of the software following tests conducted by university researchers that showed differences in testing and real-world emissions. Volkswagen at first denied the use of the defeat device, but finally admitted to it in September of that year. Even after that admission, the government said, company employees were busy deleting computer files and other evidence.

At a press conference Wednesday, Attorney General Loretta Lynch said "Volkswagen obfuscated, they denied and they ultimately lied."

The German company pleaded guilty to conspiracy, obstruction of justice and importing vehicles by using false statements in a plea deal. It also requires VW to cooperate in a continuing probe that could lead to the arrest of more employees.

Government documents accuse six VW supervisors of lying to environmental regulators or destroying computer files containing evidence.

In one case, one of the six engine development supervisors asked an assistant to search another supervisor's office for a computer hard drive that contained emails between them. Once the hard drive was found, another assistant was asked to throw it away.

According to the plea agreement, the supervisors and other employees agreed to deceive the Environmental Protection Agency and other regulators about diesel emissions starting in May 2006, when they realized the engines wouldn't meet emissions standards that were going into effect in 2007.

Under the direction of supervisors, VW employees designed engines with "defeat device" software that would reduce emissions only when the vehicle was undergoing a standard U.S. emissions test. They borrowed the idea from VW's luxury division, Audi, which was developing different engines with similar software.

In November 2006, some employees raised objections to the defeat device to the head of VW brand engine development. That official directed the employees to continue and warned them "not to get caught."

In 2014, VW employees learned about a West Virginia University study that identified emissions discrepancies in VWs. Three of the supervisors and other employees decided not to disclose the defeat device to U.S. regulators, despite increasing questions from the EPA and the California Air Resources Board.

On Aug. 19, 2015, a VW employee ignored instructions from supervisors and told U.S. regulators about the defeat devices. A supervisor confirmed the devices the following month.

VW also has agreed to the appointment of an independent monitor to oversee compliance and control measures for three years.

Volkswagen previously reached a $15 billion civil settlement with environmental authorities and car owners in the U.S. under which it agreed to buy back up to 500,000 vehicles. The company also faces an investor lawsuit and criminal probe in Germany. In all, some 11 million vehicles worldwide were equipped with the software.