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DOJ Catch of the Week -- Volkswagen

Posted  July 1, 2016

By the C|C Whistleblower Lawyer Team

This week’s Department of Justice “Catch of the Week” goes to Volkswagen AG.  On Tuesday, the beleaguered German auto-maker and related entities agreed to spend up to $14.7 billion in two related settlements to settle charges of cheating emissions tests and deceiving customers.  One settlement is with the United States and the State of California and the other is with the Federal Trade Commission.  The affected vehicles include 2009 through 2015 Volkswagen TDI diesel models of Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3.  See DOJ Press Release.

The settlements partially resolve allegations by the Environmental Protection Agency (EPA), the California Attorney General’s Office and the California Air Resources Board (CARB) — under the Clean Air Act, California Health and Safety Code, and California’s Unfair Competition Laws — that Volkswagen used so-called “defeat devices” to cheat emissions tests.  The company is also charged with violating the FTC Act through the deceptive and unfair advertising and sale of its “clean diesel” vehicles. 

According government, Volkswagen equipped its 2.0 liter diesel vehicles with illegal software that detects when the car is being tested for compliance with EPA or California emissions standards and turns on full emissions controls only during that testing process. During normal driving conditions, these defeat devices render certain emission control systems inoperative, greatly increasing emissions.  The end result is cars meeting emissions standards in the laboratory, but not on the road where they spew emissions at up to 40 times EPA-compliant levels.  The FTC further charged that the company deceived consumers with the advertising campaign it used to promote its supposedly “clean diesel” VWs and Audis, which falsely claimed that the cars were low-emission, environmentally friendly, met emissions standards and would maintain a high resale value.

The settlements require Volkswagen to offer owners of any of the nearly 500,000 affected vehicles the option to have the company buy back the car and to offer lessees a lease cancellation at no cost.  Volkswagen may also offer owners and lessees the option of having their vehicles modified to substantially reduce emissions in lieu of a buyback.  Volkswagen must set aside and could spend up to $10.03 billion to pay consumers in connection with the buy back, lease termination, and emissions modification compensation program.   The company must spend another $4.7 billion to mitigate the pollution from these cars and invest in green vehicle technology.

In announcing the settlement, the government did not mince words in describing what it considered to be Volkswagen’s egregious misconduct.  Deputy Attorney General Sally Q. Yates called Volkswagen’s transgressions “an unprecedented assault on our environment” and “a breach of the public’s trust” for which the company will be held fully accountable.  EPA Administrator Gina McCarthy similarly characterized Volkswagen’s behavior as “so blatantly” violating the country clean air protections.  And FTC Chairwoman Edith Ramirez joined in by pointing to the massive settlement as an example the high price that will be paid by “violating our consumer protection and environmental laws.”


Tagged in: Catch of the Week, Environmental Fraud,