VOLKSWAGEN DAS FRAUD

Wall Stret Journal - FBI Arrests Volkswagen Executive in Emissions Scandal

VW executive Oliver Schmidt is suspected of participating in a conspiracy to defraud the U.S. in connection with the emissions-cheating scandal

A Volkswagen AG executive was arrested and charged as part of a U.S. investigation into the German auto giant’s emissions-cheating scandal, with a federal complaint detailing how the company’s top management conspired to hide the cheating from regulators.

Oliver Schmidt, who was once in charge of ensuring that Volkswagen vehicles complied with U.S. emissions, was arrested by Federal Bureau of Investigation agents on Saturday at Miami International Airport as he prepared to fly home to Germany. He is suspected of conspiring to defraud the U.S. government and U.S. consumers to sell Volkswagen diesel vehicles.

In one of the most dramatic scenes to unfold since Volkswagen admitted in September 2015 to installing illegal software on millions of its vehicles to cheat emissions test, the portly executive stood forlorn-looking before a U.S. magistrate in Florida on Monday in handcuffs, shackles and a tan jumpsuit.

He was denied bail pending a Thursday court appearance for fear he could flee to Germany.

“And if he goes back, he’s never coming back,” Benjamin Singer, a Justice Department lawyer, told the court. Mr. Singer said an attorney for Mr. Schmidt had alerted government lawyers that the executive would be in Florida for vacation.

Volkswagen executive Oliver Schmidt is shown in this booking photo, provided by the Broward County Sheriff's Office on Monday. He appears to have become a central figure in the U.S. government’s investigation.

Volkswagen executive Oliver Schmidt is shown in this booking photo, provided by the Broward County Sheriff's Office on Monday. He appears to have become a central figure in the U.S. government’s investigation.

The charges, unsealed Monday, come as Volkswagen seeks to settle criminal allegations stemming from its admission in 2015 that it rigged nearly 600,000 diesel-powered cars sold in the U.S. to cheat on emissions tests. Volkswagen has agreed to pay up to $17.5 billion in the U.S. to settle claims with regulators, consumers, dealers and state attorneys general and could face another multibillion-dollar penalty in the expected criminal case.

Mr. Schmidt appears to have become a central figure in the U.S. government’s investigation as someone who allegedly played a key role in the company’s efforts to conceal its use of illegal software, a so-called defeat device, in diesel vehicles sold in the U.S.

The government’s case against Mr. Schmidt centers on the period from April 2014 through the summer of 2015, when as an executive in the U.S. and then in Germany he allegedly helped orchestrate steps to mislead U.S. authorities after evidence of Volkswagen’s diesel fraud emerged.

While serving as head of Volkswagen’s Environment and Engineering Office in Auburn Hills, Mich., in April 2014, Mr. Schmidt learned of a report from the International Council for Clean Transportation and West Virginia University that showed two Volkswagen diesel vehicles produced higher levels of toxic nitrogen oxide during normal road use than on treadmill tests in the laboratory.

VW Shows Strong Growth Despite Scandal Political Pressure Rises on Auto Makers GM: Small-Car Production Stays in Mexico Trump Praises Fiat Chrysler, Ford Investment in U.S. Plants VW Near Settling Criminal Case Over Emissions Cheating (Jan. 7) The FBI complaint alleges that Mr. Schmidt already knew at the time about Volkswagen’s use of illegal software and cites an email that he wrote about how the company should respond to the ICCT study, laying out a choice between lying and truthfulness. “It should first be decided whether we are honest. If we are not honest, everything stays as it is,” he wrote in an email to fellow Volkswagen managers, according to the federal complaint

Evidence against Mr. Schmidt includes testimony from two confidential witnesses, employees in Volkswagen’s engine-development group, and James Robert Liang, a Volkswagen engineer who pleaded guilty to conspiracy linked to the diesel scam in September. The FBI’s witnesses agreed to provide testimony to avoid prosecution in the U.S., according to the court filing.

Mr. Liang was involved in the diesel fraud from the early days. After nearly getting caught in 2013, Volkswagen engineers updated the illicit software. In September 2013, Mr. Liang wrote an email to a colleague, explaining the new update. The colleague replied that the “test sequence sound[ed] exciting,” adding: “If this goes through without problems, the function is probably truly watertight!”

According to testimony from Mr. Liang and confidential witnesses, the FBI complaint says, engineers in Volkswagen’s engine-development group formed an “ad hoc task force” to formulate responses that aimed to prevent U.S. environment authorities from discovering the defeat device and still appear to be cooperative.

Mr. Schmidt became directly involved in the coverup in the summer of 2015, when it was increasingly difficult for Volkswagen to conceal the defeat device and engineers involved in the scheme were beginning to panic. In one email in June 2015, cited in the government’s indictment of Mr. Liang, a Volkswagen employee stressed the need to keep U.S. authorities from testing the company’s earliest, or Gen 1, diesel vehicles: “If the Gen 1 goes onto the roller at the CARB, then we’ll have nothing to laugh about.” CARB refers to the California Air Resources Board.

Michael Horn, a former CEO of Volkswagen Group of America, testified in a congressional subcommittee on Oct. 8, 2015, that he was told by U.S. employees in July of that year that federal and California environmental regulators wouldn’t certify the company’s 2016 vehicles because of the “emissions issue.” Mr. Horn said he alerted Volkswagen management at company headquarters in Wolfsburg, Germany.

According to the complaint, Mr. Schmidt then played a key role in preparing a meeting in Wolfsburg—internally known as the “damage conference”—at which Volkswagen executives discussed the defeat devices, the consequences for the company and the decision to continue misleading U.S. authorities.

A slide prepared by Mr. Schmidt and others described possible scenarios, according to the complaint: “If the outcome was ‘negative for VW’ and there was ‘no explanation for’” the issues, “there could be an ‘Indictment?’ ” the slide read.

Mr. Schmidt and other Volkswagen employees informed attendees 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.”

(Fluierul)