Coverage: More bad news for Volkswagen

Justice Department officials found evidence of criminal wrongdoing in Volkswagen’s diesel-emissions cheating, and prosecutors are now negotiating what could be stiff financial penalties.

Mike Spector and Aruna Viswanatha of The Wall Street Journal had the news:

Federal prosecutors and Volkswagen lawyers have held preliminary discussions and are working to reach a settlement before the end of the year, though the timing may slip, the people said.

The Justice Department hasn’t broached a specific criminal charge with Volkswagen, the people said. Prosecutors have previously charged other car makers with wire fraud and concealing information from government officials for safety transgressions.

Volkswagen last year admitted to misleading environmental regulators and consumers by installing illegal emissions-cheating software on nearly 600,000 diesel-powered vehicles in the U.S. In June, it agreed to a separate civil settlement to pay regulators and consumers up to $15 billion, the people said.

The German auto maker is expected to face a large financial penalty as part of the criminal case, though the exact amount remains under discussion, the people said. The discussions so far have focused on a figure that would combine criminal and civil penalties, they said.

David Shepardson and Joel Schectman of Reuters note that the company could face billions in expenses in addition to the criminal fine:

VW could face billions of dollars more in costs in the United States if it is forced to buy back 85,000 3.0 liter Audi, Porsche and VW cars and SUVs sold since 2009.

Last month, three U.S. states led by New York filed suits seeking at least hundreds of millions of dollars and said senior executives at Volkswagen including its former chief executive covered up evidence that the German automaker had cheated on U.S. diesel emissions tests for years.

A VW spokesman said the company “is committed to earning back the trust of our customers, dealers, regulators and the American public. As we have said previously, Volkswagen is cooperating with federal and state regulators in the United States, including the Department of Justice, and our discussions are continuing toward a resolution of remaining issues.”

The fine to resolve the U.S. criminal investigation could be the largest ever imposed on an automaker, surpassing the $1.2 billion paid by Toyota Motor Corp in 2014 to resolve a Justice Department investigation into its handling of sudden unintended acceleration incidents.

Bengt Halvorson of Car and Driver reports that extradition has not been ruled out:

Any settlement on the criminal side of the case likely would top the $1.2 billion levied against Toyota for its unintended-acceleration issues. It also could involve extradition of individuals, as many of those who worked on the emissions hardware and the software strategy live in Germany.

An ongoing Department of Justice criminal probe has involved “multiple individuals” and includes interviews with current and former employees of the company—and the review of about 1.5 million documents. The results could be quite different from those of the “comprehensive legal review” conducted by the law firm Gleiss Lutz—which looked at internal-investigation information gathered by another firm, Jones Day—that reached the conclusion that VW executives weren’t responsible for serious violations.

It’s still unclear whether that might include any of the higher-profile executives that have been implicated with the project and whether they could still be prosecuted. German prosecutors have launched an investigation into the behavior of former Volkswagen Group CEO Martin Winterkorn (pictured above) based on suspicions of market manipulation and the timing in which investors could have been informed of the issue.