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VW scandal: Where will it end?

Spencer KimballSeptember 26, 2015

The auto industry is no stranger to legal trouble. Though companies normally reach financial settlements with US authorities, individuals at Volkswagen could face criminal charges. Spencer Kimball reports from Chicago.

Volkswagen VW Logo
Image: picture-alliance/dpa/P. Steffen

The timing couldn't be worse for Volkswagen. Before the VW emissions scandal broke, the US Justice Department vowed in a memo to redouble its efforts to prosecute individuals in white collar criminal cases - and a new CEO is unlikely to change that calculation.

In the aftermath of the 2008 financial crisis, federal prosecutors extracted massive financial penalties from investment banks. But only one Wall Street executive, Kareem Serageldin at Credit Suisse, was prosecuted and sentenced to time in prison.

"There's recently been criticism that the government has too often been using settlements with corporations as the end of the game and not following through as much on individual prosecutions," Samuel Buell, who prosecuted corporate crime at the Justice Department, told DW.

Amid this controversy, the Justice Department's Resources and Environment Division has launched an investigation into Volkswagen cheating on diesel emissions tests, according to Bloomberg and "The Wall Street Journal."

"This is their first opportunity really in a high-profile case to show that they mean business by going after individuals," Peter Henning, an expert on white collar crime at Wayne State University Law School, told DW. "So, unfortunately for Volkswagen, they're a year too late."

Settlements the norm

All three of the world's top automakers have now been subject to criminal investigations. General Motors was charged with concealing faulty ignition switches linked to 124 deaths. The world's third-largest automobile company settled with the Justice Department for $900 million. No individuals were charged with a crime.

Toyota faced Justice Department scrutiny for withholding information about a sudden acceleration problem linked to fatalities. The world's second largest auto company settled with the government for $1.2 billion, but still faces some 400 wrongful death and injury lawsuits. Again, no individuals were charged.

Now the world's top-selling car company, Volkswagen, potentially faces criminal charges for installing software to cheat diesel emissions tests. Though the emissions scandal has not been linked to any deaths, expert Peter Henning believes individuals at the company could very well face criminal charges.

"This is intentional misconduct," Henning said. "This is so blatant. This has been going on for years. This was corporate a decision."

"It's a perfect storm for Volkswagen," he continued. "The firm and the individuals don't have a lot of excuses, and you have a Department of Justice looking to go after individuals."

Potential criminal penalties

According to Samuel Buell, there's a range of charges individuals at Volkswagen could face depending on how the facts of the case pan out. Submitting false statements is a crime, and it's also illegal to defraud the United States government. There could also be charges for defrauding consumers who bought the diesel vehicles in question.

Sentencing would likely be based on the damage done to consumers and the environment measured in monetary terms. According to Buell, if the damages reach tens of millions or even hundreds of millions of dollars, individuals could face stiff prison sentences.

"You could be looking at five or 10 years," said Buell, a law professor at Duke University. "It's important to know that there's no parole in our federal prison system. The sentences are real. When a judge says five or 10 years, that's basically what you get."

But holding individuals accountable in the corporate context is difficult, according to Brandon Garrett, author of "Too Big to Jail: How Prosecutors Compromise with Corporations." Prosecutors have described difficulty in determining responsibility amid complex corporate structures.

"The complexity of organizations where many people work together with many levels of supervisors and consulting lawyers and other specialists can all make assigning blame a challenge if there is no 'smoking gun' type evidence," he said.