U.S. prosecutors are planning to charge high-level Volkswagen executives based in Germany over the automaker’s diesel-cheating scandal, a person familiar with the matter told Bloomberg, after the FBI arrested a manager in the U.S. for allegedly misleading regulators.
VW's executive management was informed about the "existence, purpose and characteristics" of an emissions cheating device in July 2015, and chose not to disclose it to U.S. regulators, a court filing on Monday showed.
Oliver Schmidt, 48, who headed the company's regulatory compliance office in the U.S. from 2014 to March 2015, was arrested on Saturday by federal investigators in Florida, the New York Times reported, citing people familiar with the matter. The Times reported the arrest earlier Monday.
The person familiar with the situation declined to specify when charges against more senior-level executives may be filed or whether the executives to be charged are still employed by the automaker, Bloomberg reported.
Schmidt appeared in U.S. District Court in Miami on Monday. He did not enter a plea and was ordered held pending a hearing on Thursday by U.S. Magistrate Judge William C. Turnoff.
Schmidt, who was shackled and wearing a jail uniform, was charged with fraud and conspiracy in not disclosing a cheating device used to rig U.S. diesel emissions tests from 2006 through 2015.
He was arrested on Saturday in Florida after attempting to return to Germany from a vacation, the Justice Department said. Schmidt's lawyer David Massey said Schmidt had learned of the investigation and reached out to the U.S. Federal Bureau of Investigation to offer to cooperate. Schmidt then met with FBI agents in London last year, he said.
The criminal complaint against Schmidt was unsealed Monday in U.S. District Court in Detroit.
The U.S. complaint said Schmidt and other employees gave a presentation to VW's executive management on or about July 27, 2015. The complaint did not identify the other executives who attended the meeting.
"In the presentation, VW employees assured VW executive management that U.S. regulators were not aware of the defeat device," the complaint said.
"Rather than advocate for disclosure of the defeat device to U.S. regulators, VW executive management authorized its continued concealment."
In the meeting, Schmidt and other VW employees prepared a chart with possible consequences from a meeting with California regulators. One of the "negative for VW" consequences was "there could be an 'indictment,'" the complaint says.
It was not immediately clear if or when Schmidt was terminated at VW. VW officials declined to identify Schmidt's employment status.
"Volkswagen continues to cooperate with the Department of Justice as we work to resolve remaining matters in the United States," the company said in a statement early Monday. "It would not be appropriate to comment on any ongoing investigations or to discuss personnel matters.”
Herbert Diess, VW brand chief, was asked by Automotive News about the charges on the sidelines of the Detroit auto show on Monday. He said:
“Naturally I can say little about that. We simply have to accept that the investigations continue and we hope that we can soon reach a point where we put this behind us. But these are things that the management board itself has no knowledge of,” he said referring to the status of the investigations.
“Naturally this is not good news for us at the show.”
Diess declined to comment when asked if he expected further arrests of VW executives.
Building the case
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.
According to an affidavit filed by FBI Special Agent Ian Dinsmore, internal VW emails and accounts from two anonymous cooperating witnesses from inside VW's engine development department and from James Liang, an engine department employee who pleaded guilty to fraud charges in September 2016, provided enough evidence to charge Schmidt.
When the evidence first arose that something was off with VW's diesel engines, Schmidt wrote an email to another executive questioning whether the company should fess up. "It should first be decided whether we are honest," he wrote. "If we are not honest, everything stays as it is."
After several meetings in Germany, Virginia, Michigan and California, Schmidt and other executives in August 2015 came up with a plan to conceal the defeat device from regulators. Schmidt wrote an email to another VW manager explaining that one employee would not be coming to a meeting with California regulators "so he would not have to consciously lie."
The complaint reads: "Nevertheless, in the summer of 2015, Schmidt agreed to travel to the United States to participate in direct conversations with U.S. regulators in which he intended to, and did, deceive and mislead U.S. regulators by offering reasons for the discrepancy other than the fact that VW was intentionally cheating U.S. emissions tests, in order to allow VW to continue to sell diesel vehicles in the United States."
Witness told Calfornia
