VW facing 'tsunami' of legal trouble in emissions scandal

Volkswagen Scandal Spreads to Porsche and Audi


WASHINGTON (AP) — Who knew about the deception, when did they know it and who directed it?

Those are among questions that state and federal investigators want answered as they plunge into the emissions scandal at Volkswagen that has cost the chief executive his job, caused stock prices to plummet and could result in billions of dollars in fines.

Legal experts say the German automaker is likely to face significant legal problems, including potential criminal charges, arising from its admission that 11 million of its diesel vehicles sold worldwide contained software specifically designed to help cheat emissions tests.

The Environmental Protection Agency has accused VW of installing sophisticated stealth software that enabled "clean diesel" versions of its Passat, Jetta, Golf and Beetle models to detect when they were being tested and emit less-polluting exhaust than in real-world driving conditions. The agency says the "defeat devices" allowed those models to belch up to 40 times the allowed amounts of harmful fumes in order to improve driving performance.

Learn more about Volkswagen through the photos below:

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VW facing 'tsunami' of legal trouble in emissions scandal
circa 1950: Rows of ' Beetle ' cars at a German Volkswagen plant. (Photo by Fox Photos/Getty Images)
View of a Volkswagen Beetle, 1960s. (Photo by Hulton Archive/Getty Images)
circa 1975: Volkswagen Beetle cars parked. (Photo by Keystone/Getty Images)
DETROIT, UNITED STATES: Members of the media surround the new Volkswagen Beetle after its introduction 05 January at the North American International Auto Show in Detroit, Michigan. The Beetle, the best selling car in history, is being offered on the US market after a 19 year absence. AFP PHOTO/Matt CAMPBELL (Photo credit should read MATT CAMPBELL/AFP/Getty Images)
The New 1999 Beetle From Volkswagon. The Trademark Beetle Body Shape Is Immediately Recognizable, Though It Shares No Parts With The Old Beetle. It's Both Larger (161.1 Inches In Length And 96.3 Cubic Feet Inside) And More Powerful Than Its Predecessor And The Engine Is No Longer In The Back. The Car Is Available With A New Turbocharged 150-Horsepower 1.8-Liter Four-Cylinder Engine, A 115-Horsepower 2.0-Liter Four-Banger Or A High-Tech Turbo Direct Injection Diesel Engine That Gets 48 Mpg On The Highway And Has A Driving Range Of 700 Miles. The New Beetle's A Truly Modern Volkswagen, With A Fully Galvanized Body And German Engineered Suspension. Plus A Security System, Airbags* And 6-Speaker Cassette Stereo. (Photo By Getty Images)
NUERBURGRING, GERMANY - OCTOBER 07: INTERNATIONALES ADAC EIFFELRENNEN 2000 Nuerburgring; VW NEW BEETLE CUP (Photo by Christof Koepsel/Bongarts/Getty Images)
384066 02: FILE PHOTO: The new Volkswagen 'Microbus' concept vehicle is displayed for this publicity photo. The Microbus was introduced January 7, 2001 at the North American International Auto Show in Detroit, MI. (Photo courtesy of Volkswagen/Newsmakers)
398508 01: UNDATED FILE PHOTO A redesigned Volkswagen Beetle is displayed in this undated file photograph. Volkswagen officially opened a new assembly hall near Dresden, Germany, December 11, 2001 to produce the new Phaeton luxury car, which represents a dramatic new step for the German car company away from its traditional medium and small car market. (Photo courtesy Volkswagen AG/Getty Images)
A worker walks past a Polo car at a production line in Shanghai Volkswagen Automotive Company, 09 June 2003. One out of every 120 Chinese now own their own car as the government announced that there were more than 10 million privately owned cars plying Chinese roads, state press said. AFP PHOTO/LIU Jin (Photo credit should read LIU JIN/AFP/Getty Images)
SYDNEY, AUSTRALIA - OCTOBER 16: The Volkswagen Golf R32 on display during the Sydney International Motorshow at the Sydney Exhibition Centre October 16, 2003 in Sydney, Australia. The Sydney International Motorshow is the largest collection of automobiles on show in Australia with sixty new production models unveiled and concept vehicles on display. (Photo by Cameron Spencer/Getty Images)
DETROIT - JANUARY 5: Volkswagen displays the Concept T vehicle at the North American International Auto Show January 5, 2004 in Detroit, Michigan. The show, which will feature more than 700 vehicles, opens to the public January 10. (Photo by Bryan Mitchell/Getty Images)
ZOUERAT, MAURITANIA: Finnish Juha Kankkunen drives his Volkswagen Touareg 05 January 2005, during the sixth stage of the 27th Dakar Rally between Smara and Zouerat in Mauritania. Reigning champion Stephane Peterhansel of France won the stage. Peterhansel, hampered by a cold for two days, crossed the finishing line in 4hr 0min 29sec to beat out fellow Mitsubishi driver, and two-time champion, Hiroshi Masuoka of Japan by 5min 58sec and the Volkswagen of Bruno Saby by 7min 26sec. AFP PHOTO MARTIN BUREAU (Photo credit should read MARTIN BUREAU/AFP/Getty Images)
WOLFSBURG, GERMANY - MARCH 13: (L-R) Volkswagen Board members Detlef Wittig, Francisco Javier Garcia Sanz, Horst Neumann, Martin Winterkorn, Chairman of German automaker Volkswagen, Jochem Heizmann and CFO Hans Dieter Poetsch pose at the new Volkswagen model 'Scirocco' during the company's annual press conference on March 13, 2008 in Wolfsburg, Germany. The Volkswagen Group significantly increased its earnings last year. Profit before tax therefore grew to 6.5 billion euros. (Photo by Andreas Rentz/Getty Images)
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The Justice Department says it's "working closely" with EPA investigators.

"If there is sufficient evidence to show that Volkswagen intentionally programmed its vehicles to override the emission control devices, the company and any individuals involved could face criminal charges under the Clean Air Act, and for conspiracy, fraud and false statements," said David M. Uhlmann, a former chief of the Justice Department's Environmental Crimes Section who is now a law professor at the University of Michigan. He called criminal charges "almost certain."

But Ullmann cautioned that hauling the executives involved into a U.S. courtroom could be challenging because much of the conduct at issue probably occurred overseas. While the U.S. has an extradition treaty with Germany, European regulators are also now investigating and could claim first dibs on prosecuting company officials.

CEO Martin Winterkorn resigned on Wednesday, and Volkswagen announced it would set aside $7.3 billion to cover the cost of the scandal, but even that may not be enough. The company has apologized, but has not yet detailed who was responsible for the defeat devices.

German media reported Sunday that Volkswagen had received warnings years ago about the use of illegal tricks to defeat emissions tests. Bild am Sonntag said VW's internal investigation has found a 2007 letter from parts supplier Bosch warning Volkswagen not to use the software during regular operation. Frankfurter Allgemeine Sonntagszeitung said a Volkswagen technician raised concerns about illegal practices in connection with emissions levels in 2011.

The Clean Air Act allows for fines of up to $37,500 for each of the 482,000 suspect VWs sold in the United States, potentially totaling more than $18 billion. Attorneys general for nearly 30 states and the District of Columbia have announced a coordinated investigation and said they are issuing subpoenas for company records.

There's also a high likelihood of class-action lawsuits by angry VW owners.

"They're facing a tsunami of possible state and federal enforcement actions, and a potential large number of violations — including administrative, civil and criminal," said William Carter, a former federal prosecutor in Los Angeles who specialized in environmental crimes and served as general counsel of the California Environmental Protection Agency.

Investigators will almost certainly look for any false statements made to the EPA and for signs that VW has tried to conceal wrongdoing or obstruct regulators. Fraud charges could be considered if evidence emerges that company executives used the Internet or the mail system to carry out the deception. And mail laundering allegations will be explored if investigators suspect that VW sent illicit proceeds overseas.

"If a software package such as this were intentionally designed to defeat the emissions testing, there may well be email traffic, meetings, records that would establish that intent," said Gregory Linsin, a former environmental crimes prosecutor at the Justice Department.

But Linsin said he expected the Justice Department also to take into account the multiple investigations likely to take place worldwide, and to not punish the automaker in a way that jeopardizes its ability to stay in business.

The problems at VW come as the Justice Department faces growing pressure to prosecute individual executives and employees for corporate misdeeds. The last two major criminal investigations against auto companies — Toyota and General Motors — yielded massive fines over car safety problems but has resulted in no prosecutions of executives. Those outcomes dismayed consumer watchdog groups and grieving victims' relatives, who demanded better accountability for failure to disclose vehicle defects.

A memo this month by Deputy Attorney General Sally Yates sought to reaffirm the Justice Department's commitment to prosecuting employees and executives, directing among other policy mandates that corporations pushing for credit for cooperating with the government must first turn over evidence against individuals.

"Volkswagen has a fundamental choice to make," said Uhlmann, the former prosecutor. "That is whether it intends to cooperate and seek leniency, or whether it wants to fight the charges. Every indication over the last several days from Volkswagen is that it intends to cooperate."

Asked whether that meant he expected company executives to voluntarily come to the United States to stand trial, he laughed.

"Absolutely not," he said.

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