Volkswagen Emissions Deception Involved Executives at Highest Levels, U.S. Lawsuits Allege
The New York and Massachusetts attorneys general on Tuesday directly challenged Volkswagen’s defense over its emissions deception, calling the decision to thwart pollution tests an orchestrated fraud that lasted more than a decade, involved dozens of engineers and managers and reached deep into the company’s boardroom.
The accusations, levelled in state lawsuits, contradict Volkswagen’s portrayal of the deception, representing a new threat to the carmaker’s finances, reputation and management.
Volkswagen, which admitted late last year to equipping 11 million vehicles worldwide with software to cheat emissions tests, has maintained that the deception was limited to a small group of people. The company has said top management was not aware of the cheating software, known as a defeat device.
But the New York civil complaint, drawing on internal Volkswagen documents, emails and witness statements, depicts a corporate culture that allowed a “willful and systematic scheme of cheating.” The evidence paints the most detailed picture yet about how the deception unfolded and who was responsible.
For the first time, the New York complaint connects Volkswagen’s chief executive, Matthias Mueller, to the scandal. Mueller, according to the suit, was aware of a 2006 decision to not equip Audi vehicles with equipment needed to meet U.S. clean-air standards. To save money, the company opted instead to install defeat devices in the cars. The suit stops short of accusing Mueller of having specific knowledge of the device.
At the time, Mueller was head of project management at Audi, Volkswagen’s luxury car division. He became chief executive of Volkswagen in September, replacing Martin Winterkorn, who resigned days after the Environmental Protection Agency accused the company of the diesel deception in September.
“The allegations against Volkswagen, Audi and Porsche 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,” Eric T. Schneiderman, the New York attorney general, said in a statement.
Maura Healey, the Massachusetts attorney general, filed a suit Tuesday that makes similar accusations. The suits claim that the company made false statements to regulators and broke laws requiring cars to have approved pollution control systems
Mueller and Winterkorn have previously denied any involvement in the wrongdoing. “There is no credible evidence to support the allegation regarding Matthias Mueller,” a Volkswagen spokeswoman, Jeannine Ginivan, said in an emailed statement. “It does not bear scrutiny.”
The potential blowback for Volkswagen could be costly.
The company last month agreed to pay nearly $15 billion, a record, to settle claims in the United States by Volkswagen owners and regulators. But the settlement did not resolve what penalties might be imposed on Volkswagen, leaving room for additional suits like those filed by the two attorneys general.
The New York and Massachusetts suits do not specify what penalties the states are seeking, but they could easily be in the hundreds of millions of dollars. If other states follow as expected, Volkswagen could face billions of dollars in extra costs.
The company is also dealing with criminal investigations and shareholder lawsuits around the world. The U.S. Justice Department, in announcing the earlier settlement, said it was still pursuing a criminal investigation.
Volkswagen, the company’s spokeswoman said, had already addressed many of the allegations in its discussions with U.S. federal and state authorities, referring in part to the $15 billion settlement. “It is regrettable that some states have decided to sue for environmental claims now,” she said.
The complaints break the silence that had prevailed in both Germany and the United States about the genesis of the scandal and who was involved.
The New York complaint claims that more than two dozen Volkswagen engineers and managers were involved in the deception, including Wolfgang Hatz, the former head of engine and transmission development at Volkswagen and Audi; Ulrich Hackenberg, the former head of development for Audi; and Heinz-Jakob Neusser, the former head of development for the Volkswagen brand. While several executives have been identified by the media, German prosecutors, because of the country’s strict privacy laws, have only named one suspect, Winterkorn.While scrutiny has focused on the Volkswagen brand, the use of defeat devices was pioneered by Audi, according to the complaint. Engineers at Audi had developed a way to eliminate the clattering sound that diesel engines tend to make after starting. But the solution increased pollution to impermissible levels.
So Audi in 2004 programmed its diesels in Europe to turn off the noise reduction technology when software recognized that the cars were undergoing emissions tests, the complaint said. The defeat device was euphemistically labeled the “acoustic function.” The same software was later adapted after engineers determined that a new generation of diesel motors could not meet U.S. emissions standards, according to the complaint.
The New York complaint is the first to explicitly present evidence that top managers, at the very least, were aware of the engineering problems that led to the use of defeat devices.
According to the New York suit, Mueller and Winterkorn were informed in 2006 that Audis with 3-liter diesel engines needed additional equipment to meet U.S. standards. Specifically, they needed a larger tank to hold the chemical solution used to neutralize nitrogen oxide emissions in the exhaust.
But Volkswagen and Audi, the complaint said, did not want to spend the money necessary to redesign the cars to accommodate larger tanks. Instead, the company decided to deploy defeat devices. Both Winterkorn and Mueller held senior positions at the Audi unit at the time.
Documents used as evidence refer to “H. Mueller,” according to the complaint. An Audi executive told investigators that was a reference to Matthias Mueller, the current chief executive, the suit said.
In early 2014, engineers at West Virginia University published a study in which two unidentified diesel cars were found to have emitted up to 40 times as much pollution on highways as they did under laboratory conditions.
Inside Volkswagen, there was widespread alarm. “Anxiety within the company about the possibility that the vehicles that failed were Volkswagens was demonstrated by the flurry of internal Volkswagen and Audi communications that followed,” the complaint said.
After it became clear that the cars in the study were Volkswagens — a 2012 Jetta and a 2013 Passat — company engineers in the United States were bombarded with requests for information by senior managers, including a management board member, Christian Klingler. He has since left Volkswagen for reasons the company said were not related to the scandal.
Over the next 17 months, Volkswagen embarked on a campaign to “mislead and confuse” regulators and the public, according to the complaint. In a conference call with California regulators in October 2014, Volkswagen officials “cited phony technical explanations for high emissions,” the suit said.
In May 2015, after learning that California regulators planned to conduct more thorough tests of Volkswagen diesels, executives’ emails “began to reflect desperation and panic,” the complaint said. One executive, facing questions from suspicious California officials about the functioning of the emissions system, wrote to co-workers, “Come up with the story, please!”
Volkswagen “polluted our air, and damaged our environment and then, to make matters worse, plotted a massive cover-up,” Healey, the Massachusetts attorney general, said in a statement.