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F.B.I. Arrests Volkswagen Executive on Conspiracy Charge in Emissions Scandal

The F.B.I. has arrested a Volkswagen executive in Florida, accusing him of playing a central role in a broad conspiracy to keep United States regulators from discovering that diesel vehicles made by the company were programmed to cheat on emissions tests.

The executive, Oliver Schmidt, a German who is the former top emissions compliance manager for Volkswagen in the United States, was arrested on Saturday by investigators in Florida on a charge of conspiracy to defraud the United States. He is expected to be arraigned on Monday.

The arrest of Mr. Schmidt is an escalation of the criminal investigation into emissions cheating by Volkswagen and comes amid talks between the company and the United States Justice Department about what penalties the carmaker should accept as part of a settlement.

After a study by West Virginia University first raised questions over Volkswagen's diesel motors in early 2014, Mr. Schmidt played a central role in trying to convince regulators that excess emissions were caused by technical problems rather than by deliberate cheating, Ian Dinsmore, an F.B.I. agent, said in a sworn affidavit used as the basis for Mr. Schmidt's arrest.

Mr. Schmidt deceived American regulators "by offering reasons for the discrepancy other than the fact that VW was intentionally cheating on U.S. emissions tests, in order to allow VW to continue to sell diesel vehicles in the United States," the affidavit said.

Mr. Schmidt continued to represent Volkswagen after the company admitted in September that cars were programmed to dupe regulators. He appeared before a committee of the British Parliament in January, telling legislators that Volkswagen's behavior was not illegal in Europe.

Lawyers representing Mr. Schmidt did not respond to requests for comment late Sunday. Officials at the Justice Department also declined to comment, as did an F.B.I. spokesman in Detroit.

In a statement, Jeannine Ginivan, a spokeswoman for Volkswagen, said that the automaker "continues to cooperate with the Department of Justice" but that "it would not be appropriate to comment on any ongoing investigations or to discuss personnel matters." A Volkswagen spokesman in Germany also declined to comment.

Lawsuits filed against Volkswagen by the New York and Massachusetts state attorneys general accused Mr. Schmidt of playing an important role in the carmaker's efforts to conceal its emissions cheating from United States regulators.

In 2014, when California air quality officials began an investigation of Volkswagen emissions, Mr. Schmidt was general manager of Volkswagen's Engineering and Environmental Office based in Auburn Hills, Mich. For more than a year, he and other Volkswagen officials repeatedly cited false technical explanations for the high emissions levels, the authorities said.

In September 2015, Mr. Schmidt and other Volkswagen officials formally acknowledged the existence of a so-called defeat device that allowed Volkswagen cars to cheat emissions tests.

Volkswagen's cover-up and belated confession angered officials from the California Air Resources Board and the Environmental Protection Agency, and it is likely to have vastly increased the cost to the company from the scandal. It has already agreed to pay $16 billion to owners of diesel vehicles and will probably have to pay several billion dollars more in fines.

Volkswagen eventually said that it had fitted 11 million diesel cars worldwide with illegal software that made the vehicles capable of defeating pollution tests.

The software enabled the cars to sense when they were being tested for emissions and turn on pollution-control systems to curb emissions at the cost of engine performance. But those controls were not fully deployed on the road, where cars spewed nitrogen oxide at up to 40 times the levels allowed under the Clean Air Act.

James Liang, a former Volkswagen engineer who worked for the company in California, pleaded guilty in September to charges that included conspiracy to defraud the federal government and violating the Clean Air Act. But Mr. Schmidt's arrest brings the investigation into the executive ranks.

The arrest came as Volkswagen and the Justice Department neared a deal to pay more than $2 billion to resolve the criminal investigation into the emissions cheating. The company or one of its corporate entities is expected to plead guilty as part of the deal.

The settlement could come as early as next week, barring any last-minute hiccups, according to people with knowledge of the negotiations.

The German automaker has been eager to put the Justice Department investigation behind it before President-elect Donald J. Trump is sworn in on Jan. 20.

American prosecutors had traveled to Germany in recent months to interview Volkswagen executives, according to German prosecutors.

The criminal case against Volkswagen, and the potential guilty plea, set it apart from other recent auto industry investigations. In settlements with General Motors and Toyota over their handling of safety defects, for example, the companies agreed to pay large fines but did not plead guilty.

Prosecutors are also mulling criminal charges against Takata, the Japanese manufacturer under criminal investigation for its defective airbags.

Volkswagen has already agreed to pay up to nearly $16 billion to resolve civil claims in what has become one of the largest consumer class-action settlements ever in the United States, involving half a million cars.

Under the settlement, most car owners have the option of either selling their vehicles back to Volkswagen or getting them fixed, provided the automaker could propose a fix that satisfied regulators.

The scandal has affected many Volkswagen and Audi models, including the Audi A3 and Volkswagen Beetle, Golf, Jetta and Passat diesel cars.

[Source: By Adam Goldman, Hiroko Tabuchi and Jack Ewing, The New York Times, 09Jan17]

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Corruption and Organized Crime
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