VW executives concealed diesel cheating – FBI court filing

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By David Shepardson

<span class="articleLocation”>Volkswagen (VW) executives decided to cover up
cheating of U.S. emissions tests when they were told about it
almost two months before the matter became a public scandal in
2015, according to a court filing by U.S. law enforcers seen by
Reuters.

Senior VW manager Oliver Schmidt, who is due to appear in
court charged with defrauding the United States later on Monday,
was one of those who informed executive management about the “existence, purpose and characteristics” of so-called defeat
devices on or around July 27, 2015, according to the filing by
the Federal Bureau of Investigation (FBI) to a Michigan court.

“Rather than advocate for disclosure of the defeat device to
U.S. regulators, VW executive management authorised its
continued concealment,” the filing said.

A spokesman at VW headquarters in Germany said
the company could not comment on an ongoing legal process.

“Volkswagen continues to cooperate with the Department of
Justice as we work to resolve remaining matters in the United
States,” the carmaker said in a statement. “It would not be
appropriate to comment on any ongoing investigations or to
discuss personnel matters.”

Schmidt’s arrest and court appearance come as VW nears a $3
billion-plus settlement with the U.S. Justice Department and
Environmental Protection Agency, which could be announced as
soon as Wednesday.

But the allegations in the FBI filing show how difficult it
is proving for VW to draw a line under the biggest business
scandal in its 80-year history almost 16 months after it broke.

Europe’s biggest carmaker initially blamed a small group of “rogue engineers” for the test-cheating, and has repeatedly said
no current or former board members were involved.

VW admitted in September 2015 to installing secret “defeat
device” software in hundreds of thousands of U.S. diesel cars to
cheat exhaust emissions tests and make them appear cleaner than
they were on the road, and that up to around 11 million vehicles
could have similar software installed worldwide.

The ensuing scandal has cost the company more than 18
billion euros ($18.9 billion) in provisions, led to the ousting
of its longtime CEO Martin Winterkorn and forced it to drop its
diesel offensive in the United States.

VW commissioned law firm Jones Day to conduct an independent
internal investigation into the matter but has yet to publish
any findings.

SURPRISE

Schmidt – a former VW U.S. executive and champion of “clean
diesel” – was arrested on Saturday in Florida, a source briefed
on the matter told Reuters. He headed VW’s U.S. Energy and
Environmental Office in 2014 and 2015 before returning to live
in Germany.

Schmidt will appear in court on Monday afternoon, a
spokeswoman for the U.S. Attorney’s Office in Detroit said.

VW’s sales chief Juergen Stackmann said management was
surprised by the news of Schmidt’s arrest and did not know
whether it was related to the diesel scandal.

“We even don’t know if there is a connection,” he told
Reuters on the sidelines of the Detroit auto show.

VW Chief Executive Matthias Mueller stayed away from the
show, at which VW brand chief Herbert Diess was the company’s
most senior representative.

Several U.S. states named Schmidt in lawsuits filed last
year as playing an important role in VW’s efforts to conceal
from U.S. regulators the true reason for its vehicles’
unlawfully high real-world nitrogen-oxide emissions.

In testimony to a UK parliamentary committee a year ago,
Schmidt said he had been tasked with supporting diesel
development at VW headquarters in Wolfsburg after the software
scandal erupted.

The carmaker is involved in lawsuits in several countries.
On Monday, a law firm in the UK – where more than 1.2 million VW
cars are affected – launched legal action seeking thousands of
pounds (dollars) of compensation for each driver.

Some of the lawsuits have been brought by investors who
claim Volkswagen failed to inform them in time of the risks
after it admitted cheating the tests. VW shares fell by more
than a third in the days after the scandal broke out, wiping
more than 27 billion euros off the company’s market value.

On Monday, however, the shares rose 4.2 percent to their
highest since September 2015 on optimism about the expected U.S.
criminal settlement, topping the German blue-chip DAX index although still 10 percent below pre-scandal levels.

A Frankfurt-based trader said: “$3 billion or $4 billion
shouldn’t really matter anymore; crucial should be that final
settlement will be reached.” (Additional reporting by Jan Schwartz in Detroit and Ilona
Wissenbach in Frankfurt)



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