- By David FrancisDavid Francis is a senior reporter for Foreign Policy, where he covers international finance. An award-winning journalist, David has reported from all over Europe, Nigeria, Kenya, Mexico, and Afghanistan on terrorism, national security, the geopolitics of energy, global economics, and the European financial crisis. His work has been published in outlets including the Christian Science Monitor, the Financial Times Deutschland, Slate, and SportsIllustrated.com.
Volkswagen, the iconic German carmaker that installed emissions-cheats on some 11 million vehicles, has been in U.S. crosshairs for months. On Monday, the Justice Department finally pulled the trigger.
The move came in a federal court in Detroit, where prosecutors acting on behalf of the Environmental Protection Agency accused Volkswagen of a systematic effort to evade the environmental regulations enshrined in the 1963 Clean Air Act (the law has been subsequently amended). In a statement, the government alleged “that nearly 600,000 diesel engine vehicles had illegal defeat devices installed that impair their emission control systems and cause emissions to exceed EPA’s standards, resulting in harmful air pollution.”
If the auto maker is found guilty, the Justice Department wants Volkswagen to pay as much as $37,500 for every vehicle that violated the law. That means Volkswagen could have to pay out more than $90 billion, far greater than initial estimates of $18 billion in penalties.
Monday’s suit repeats the allegations made by the EPA when it announced the emissions cheat in September 2015. It also only impacts a small fraction of the cars that allegedly had the software, millions of which were sold in Europe, where diesel models are more popular. Germany is also investigating the company for the fraud.
The size of the possible financial penalties shows that U.S. law enforcement is playing hardball with the German company, which has already admitted wrongdoing. It could be an incentive to get Volkswagen to settle the case quickly, something that Kenneth Feinberg, the lawyer hired by the company to handle the U.S. inquiry, said he wanted to do last month. In a statement released after the suit was made public, VW reiterated its desire to cobble together a deal without going to trial.
“Volkswagen will continue to work cooperatively with the EPA on developing remedies to bring the TDI vehicles into full compliance with regulations as soon as possible,” the company’s statement said, using an acronym for diesel cars. “We will continue to cooperate with all government agencies investigating these matters.”
Volkswagen has already paid a steep financial cost for the cheat. Before the scandal broke in mid-September, its stock traded at more than $160. It now goes for $126.40.
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