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VW Exec Sentenced to 7 Years in Prison for Diesel Role

Dec. 7, 2017
Volkswagen has already incurred about $30 billion in costs following its September 2015 admission that it outfitted about 11 million diesel cars worldwide with a defeat device, and the tolls keep coming.

A Volkswagen AG compliance executive who pleaded guilty in the U.S. for his role in the company’s $30 billion emissions cheating scandal was sentenced to 7 years in prison.

Oliver Schmidt, VW’s compliance liaison with American regulators, pleaded guilty in August to one count of conspiracy to defraud the U.S. and another of violating the Clean Air Act. Federal prosecutors sought the maximum of seven years, while Schmidt asked U.S. District Judge Sean Cox to limit his sentence to 40 months, saying he’d been coached to lie about emissions by his bosses.

“I only have myself to blame,” Schmidt said before Cox handed down the sentence. He admitted that he tried to conceal VW’s cheating. “I accept the punishment.”

Cox sentenced Schmidt to 60 months for the first count and 24 months for the second count, to run consecutively. Schmidt was fined $400,000. Schmidt knew VW’s vehicles weren’t compliant with U.S. emissions standards, Cox told the defendant.

“In my opinion, you were a key conspirator, responsible for the cover-up in the United States,’’ the judge said. Schmidt worked with VW management to conceal the fraud, using it as an “opportunity to shine, and climb the corporate ladder,’’ Cox added. “This is a very serious, troubling offense.’’

A $30 Billion Bill

Volkswagen has already incurred about $30 billion in costs following its September 2015 admission that it outfitted about 11 million diesel cars worldwide with a defeat device, embedded software that allowed the vehicles to recognize when they were being tested in laboratory conditions, and to reduce emissions to meet acceptable levels.

VW developed the devices in an attempt to boost sales by offering “clean diesel” that would meet heightened emissions standards and attract environmentally conscious customers. The company needed to certify that the vehicles complied with U.S. standards and wasn’t able to do so without cheating.

VW’s costs so far include settlements of government and customer lawsuits, buybacks and retrofits of affected vehicles, and the criminal plea deal, which included $2.8 billion in criminal fines and $1.5 billion in civil penalties.

Ongoing Investigation

The company and its executives are still under investigation in Germany and it faces investor lawsuits in the U.S. and at home.

Schmidt is the second employee sent to prison for participating in the cheating scheme. James Liang, a veteran VW engineer, was sentenced to 40 months in prison in August. Liang, who pleaded guilty to conspiracy last year and has been cooperating with prosecutors, has appealed his sentence.

Schmidt, a German national, was arrested in Miami while on vacation. He was deemed a flight risk and denied bail. Five other executives were indicted by the U.S. and remain in Germany, avoiding arrest. They include executives who led engine development, as well as the failed efforts to design a diesel engine that would meet the tougher emissions standards the U.S. adopted for 2007, and another liaison to U.S. regulators.

Schmidt, former senior manager of Volkswagen’s U.S. environment and engineering office, downplayed his role in the scheme in court papers filed last week asking Judge Cox to limit his sentence. Schmidt said he first learned about the company’s scheme in the summer of 2015, at the tail-end of the conspiracy. Of the 500,000 affected vehicles sold in the U.S., only 8,757 can be “attributed to Mr. Schmidt’s misconduct,’’ his lawyers argued in the filing.

Prosecutors disagreed, saying in recommending the maximum jail time that Schmidt stonewalled the regulators, encouraged “key engineers at VW” to destroy documents, and provided false information to federal agents.

A former Audi AG manager, Giovanni Pamio, has also been charged by the U.S. for his alleged role in helping Volkswagen cheat emissions standards.

The case is U.S. v. Schmidt, 16-cr-20394, U.S. District Court, Eastern District of Michigan (Detroit).

By Margaret Cronin Fisk and Steven Raphael

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