The Crime Book

130

I

n an unprecedented move in

2015, the US Environmental

Protection Agency (EPA)

accused German car manufacturer

Volkswagen (VW) of installing

prohibited “defeat device” software

on diesel-powered vehicles sold in

the US.

The software reduced nitrogen

oxide emissions when the cars

were placed on a test machine but

allowed higher emissions and

improved engine performance

during driving. Once on the road,

cars would pump out up to 40

times the permitted level of

IN CONTEXT

LOCATION

Worldwide

THEME

Software manipulation

BEFORE

2010 Cummins, Inc. motor

vehicle engine company,

headquartered in Columbus,

Indiana, pays a $2.1 million

(£1.4 million today) penalty

and recalls 405 engines after it

ships over 570,000 heavy-duty

diesel engines without

pollution control equipment.

AFTER

2016 In Japan, Mitsubishi

Motors admits falsifying fuel

economy tests for 157,000 of

its own cars and for 468,000

vehicles that Mitsubishi

produced for Nissan.

The Volkswagen emissions

scandal is the greatest

corporate scandal

since the global

financial crisis.

Peter Spence

THE IRREGULARITIES...

GO AGAINST EVERYTHING

VOLKSWAGEN STANDS FOR

THE VOLKSWAGEN EMISSIONS SCANDAL, 2015

Corporate punishment

The typical punishment for

corporate wrongdoing is to levy

fines against the corporation,

treating it as a legal “person”,

rather than against its

executives. The US – which

established the concept of

corporate criminal liability in

the 19th century – investigates

and prosecutes corporate

wrongdoing most vigorously,

but other countries are also

embracing this concept.

Recent trends have been to

increase fines substantially,

especially where internal

controls are found to be lacking

or companies have failed to

cooperate with investigators.

In September 2016, Deutsche

Bank, Germany’s largest lender,

faced a $14 billion (£11 billion)

demand from the US Department

of Justice for mis-selling

mortgages to investors during

a housing bubble in 2005.

Critics claimed that such an

enormous fine could cause

international financial instability

and argued that Deutsche Bank

should be restructured and

strengthened instead.

130-131_Volkswagen.indd 130 02/12/2016 16:18

131

A portable emissions

measurement system is shown

attached to the exhaust of a car during

tests performed by Germany’s biggest

independent technical testing agency.

See also: The Enron Scandal 122–23 ■ The Siemens Scandal 126–27

WHITE COLLAR CRIMES

nitrogen oxide. In September 2015,

Volkswagen admitted that

11 million VW and Audi 2.0 litre

diesel cars had been equipped with

software used to cheat on

emissions tests. The auto giant’s

chief executive Martin Winterkorn

apologized and resigned.

The ringleader

US investigators reviewed 1.5

million documents as part of its

criminal probe into the scandal.

Key to the investigation was James

Robert Liang, a German citizen

who headed the Volkswagen Diesel

Competence team in the US. He

had been a member of the team

of engineers that developed the

so-called “clean diesel” engine in

Germany. According to court

documents, he and his colleagues

concluded they could not design a

diesel engine that would meet the

strict US emissions standards,

so they designed and implemented

software that would cheat the

emissions tests instead.

In June 2016, VW agreed to a

separate civil settlement to pay

regulators and consumers up to

VW recalls millions of cars

worldwide and agrees to pay $15 billion

(£12 billion) to settle claims in the US

Defeat device software put into 11 million VW engines

to fool emissions tests

During emissions test, car produces low emissions

and passes the test

Testing at the University of West Virginia in May 2014

reveals the diesel dupe

On the road, engine emits nitrogen oxide at

40 times the allowable level

$15 billion (£12 billion). The deal,

announced in August 2016,

involved 652 US car dealers.

In September 2016, Liang

pleaded guilty to US federal

charges for his role in the scandal

and agreed to cooperate with the

investigation of other Volkswagen

employees. It came out that Liang

had answered questions from

environmental regulators about the

engines’ test results, knowing they

were false. Federal investigators

further contended that Liang

emailed colleagues in Germany

about the software while

committing the crimes in the US.

Liang faces up to five years in

a US prison, deportation following

his release, and a fine of up to

$250,000 (£200,000). However, this

is unlikely to be the end of the

scandal: the company still faces

criminal and civil litigation. ■

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