The DOJ’s Lawsuit Is Just the Start of VW’s Legal Woes
It’s already been a terrible three months for Volkswagen, and things just got worse. Monday morning, the US Department of Justice announced it’s suing the automaker for violation of the Clean Air Act on behalf of the EPA. It’s a civil case with a relatively light burden of proof, but it’s also, most likely, just the beginning of the VW’s legal troubles in the US. Criminal prosecutions, with the serious possibility of prison sentences, may well follow.
In September, the EPA accused VW of cheating on emissions tests on 582,000 diesel-powered vehicles sold in the US between 2009 and 2015. VW admitted to illegally installing software on its cars to change their performance during testing—11 million on total, globally—and stopped selling the vehicles.
Now, VW’s facing dozens of lawsuits from dealers and customers. The civil fines for violating the Clean Air Act could be up to $37,500 per car—that’s $18 billion. VW sales have plummeted, and it likely won’t be allowed to sell its next generation of diesel cars in the US, since there’s no easy way to meet regulations without the illegal software. The company will likely have to recall more than 300,000 cars in India, a country with notoriously lax environmental regulations. Meanwhile, German prosecutors have announced they’re investigating the automaker for tax evasion, too.
Now, the US DOJ is piling on. “With today’s filing, we take an important step to protect public health by seeking to hold Volkswagen accountable for any unlawful air pollution, setting us on a path to resolution,” says Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance.
This civil case only pertains to the violation of the Clean Air Act, and shouldn’t be hard for the feds to win. The DOJ just needs to show a preponderance of evidence the cars cheated on emissions tests. That’s a “very low standard given [VW’s] admissions,” says Timothy Heaphy, a former US Attorney and the chair of white collar defense at Hunton & Williams. VW will likely negotiate a settlement, he says: That’s “an easy victory for the government.”
Call this the appetizer. And from what the DOJ says, it’s not stopping until it’s had a full meal.
“Today’s complaint is the first stage in bringing Volkswagen to justice,” says US Attorney Barbara L. McQuade. The investigation is ongoing, and filing the civil complaint doesn’t mean the government can’t proceed with charges of defrauding customers (likely under mail and wire fraud statutes, which are quite broad). Then, there are criminal charges.
“Criminal clean air cases are relatively rare,” says Heaphy, because the burden of proof is heavier. The DOJ must prove beyond a reasonable doubt that VW intentionally violated the law. But if the feds decide they can do that, the potential consequences become far more severe.
First off, criminal charges open VW up to heavier financial penalties. If VW is found guilty, it could be ordered to pay twice the gross gain of its actions. Add up the profits from selling 600,000 cars, then double that, and you’re talking about a lot of money.
Perhaps more frightening for Das Auto is the threat of prison time. That could be up to 20 years, Heaphy says, though an executive without a criminal history would likely receive less. But to send someone to jail, you need someone to put on trial. That’s where the Yates Memo comes in.
On September 9, barely a week before the EPA publicly accused VW of breaking the law, Deputy Attorney General Sally Quillian Yates published a memo addressing the difficulty of pursuing individuals for corporate crimes. When dealing with large corporations, it’s hard to concretely prove that someone knew something at any given point. But going after individuals is “one of the most effective ways to combat corporate misconduct.” It’s easy to see why. Executives may not be afraid of seeing their company cough up fines. But they are probably pretty terrified of going to prison.
So the DOJ outlined a few steps for sending them there easier. For one, a corporation won’t get any credit for cooperating with the government—a mitigating factor in sentencing—unless it identifies individual culprits. Second, the DOJ says investigations should focus on individuals from the get go. Third, “absent extraordinary circumstances,” the DOJ should not waive its right to pursue individuals when resolving matters when the corporation as a whole.
The DOJ has pledged to go after people, not just corporations, and to go after them hard. The VW case will be the first test of that resolve. And it’s just getting started.
See the article here: