VW Sued by NY Over Pollution Linked to Cheat Device

  • VW in June reached a $15.3 billion settlement with regulators
  • Maryland AG sees hundreds of billions in potential penalties

Volkswagen AG is facing new lawsuits by New York and at least two other states that might cost the company hundreds of billions of dollars for cheating on pollution-control tests.

The suits include claims that former VW Chief Executive Officer Martin Winterkorn and other top company executives orchestrated an elaborate coverup when the scam came to light, New York Attorney General Eric Schneiderman said. New York’s complaint was filed Tuesday in state court in Albany, the attorney general said.

“This was a widespread conspiracy involving many, many people,” Schneiderman said at a press conference. “The top brass knew” they were in violation of state and federal laws, he said.

VW’s legal woes are far from over, as evidenced by the states’ suits and ongoing criminal probes, despite its $15.3 billion settlement with regulators and customers in June. The German company admitted in September to using so-called defeat devices to systematically rig environmental tests since 2009. The devices hid the fact that its diesel vehicles were emitting far more pollutants than allowed under U.S. law.

Volkswagen wasn’t taking the states’ claims seriously, which is why the lawsuits were pursued, Maryland Attorney General Brian Frosh said at a press conference. Penalties against the company might run into the hundreds of billions of dollars, he said.

For a video on the rise and fall of Volkswagen, click here.

The allegations “reveal a culture of deeply rooted corporate arrogance, combined with a conscious disregard for the rule of law or the protection of public health and the environment,” Schneiderman said. “Substantial penalties must be imposed on the Volkswagen companies, above and beyond the amount they have to pay to make American consumers whole.”

The suit names VW’s Audi and Porsche units, as well as their U.S. divisions. According to the complaint, numerous VW employees destroyed incriminating evidence after they were tipped off by a senior in-house lawyer in Germany and then repeatedly failed to disclose to regulators the true reason for the discrepancies.

VW is cooperating with the U.S. Department of Justice, the Environmental Protection Agency and the California Air Resources Board on a "national resolution" of all remaining environmental issues, Jeannine Ginivan, a spokeswoman for the carmaker, said in a statement.

"It is regrettable that some states have decided to sue for environmental claims now, notwithstanding their prior support of this ongoing federal-state collaborative process," Ginivan said.

Six Variations

There were six variations of the defeat device installed by VW and Audi starting in 2008, with Porsche implementing them later, according to Schneiderman’s office. VW used the devices even after the EPA began looking into the software to determine its purpose, according to the complaint.

“Volkswagen, Audi and Porsche defrauded thousands of Massachusetts consumers, polluted our air and damaged our environment, and then, to make matters worse, plotted a massive cover-up to mislead environmental regulators,” the state’s attorney general, Maura Healey, said in a statement.

“Clean and green” was the center of the companies’ false-marketing efforts, including a Super Bowl ad highlighting the vehicles’ environmental friendliness, in one of the most-watched television commercials in the U.S., Schneiderman said. He called the scam “appalling.”

Sham Recalls

VW tried to cover up the problem through sham recalls that the company knew wouldn’t meet the required standards and then only confessed to the defeat devices “when they knew the regulators had the goods on them,” according to Schneiderman’s statement.

Schneiderman’s press conference included a blow-up poster of an internal e-mail to Mark Gillies, a spokesman for VW in the U.S. from Oliver Schmidt, director of VW’s environmental and engineering office in August of 2014.

“[Audi’s] V6 has exactly the same issue [as VW diesels], but not public yet. They have not been caught,” the e-mail read.

“These actions highlight how stubborn and unrepentant the culture at Volkswagen is that gave rise to the systematic cheating and deception described in this complaint,” New York says in the complaint.

Watch Next: The Long Rise and Rapid Fall of Volkswagen

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VW agreed in June, as part of its efforts to deal with the diesel-cheating complaints, to pay $603 million to address consumer and environmental claims by 44 U.S. states.

That didn’t resolve any of the claims for civil penalties that New York, Massachusetts and other states, as well as the EPA, may bring for the companies’ violations of state and federal environmental laws and regulations, nor did the settlements cover all of the vehicles equipped with emission-control defeat devices.

Maryland’s suit will hold the German company accountable “for the pollution they’ve caused and for violating Maryland’s environmental laws as a result of defrauding regulators by using ‘defeat devices’ for emissions control,” according to Frosh’s statement.

Auto-Industry Record

VW’s settlements in June set an auto-industry record.

The origin of the defeat devices may go back as far as 1999, when VW’s Audi unit encountered emissions-related engineering challenges while developing large diesel luxury cars for the European market, according to the New York suit. Audi’s engineers developed “pilot injection” technology to eliminate clattering sounds from the diesel engines, but then caused the engine to exceed emissions standards, according to the complaint.

“In 1999, Audi used a defeat device to solve the problem during testing,” New York said. Audi referred to the defeat device as “the acoustic function” when it deployed the software in diesel cars in Europe from 2004 to 2008, according to Schneiderman’s office.

VW also faces lawsuits by investors in the U.S., as well as parallel suits, including consumer complaints, in Germany. Future expenses will include perhaps hundreds of millions of dollars in fees for the lawyers who secured the deal for car owners. More penalties, along with further damage to VW’s reputation, may yet spring from criminal probes in the U.S., Germany and South Korea.

(Corrects e-mail sender and recipient in 14th paragraph.)
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