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Volkswagen Exec Arrested in Diesel Scandal

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By William Vogeler, Esq. on January 10, 2017 3:12 PM

When Volkswagen first got caught cheating emissions tests in 2014, Oliver Schmidt was right to think his company might have a problem.

"It should first be decided whether we are honest," he said in an email to a Volkswagen colleague in April 2014. Schmidt was working as an executive over emissions testing in the United States at the time, but was transferred to Germany after the revelations led to a fiasco that has cost the company so far about $20 billion to pay for recalls, settlements, and criminal defense.

Arrested this week in Miami, Schmidt may now be thinking whether he should have returned to the United States. He has been charged with defrauding the government and conspiracy in the biggest cover-up of Clean Air Act violations in history.

Bad Timing

Investigators said they were lucky to catch up with Schmidt, who was about to board a jet bound for Germany when he was arrested. Schmidt and most of the scandal suspects live in Germany, which does not usually extradite its citizens. Reportedly, German authorities are investigating criminal action against Volkswagen executives there for securities violations.

In the criminal complaint filed against Schmidt in the U.S., he is portrayed as a central player in the cover-up. He warned executives in Germany that the company could face criminal charges for its actions, according to court documents.

The company is negotiating with the Justice Department to pay more than $2 billion and to plead guilty to at least one criminal charge in settlement of the cover-up. However, it would not settle charges against individual employees, such as Schmidt.

The emissions scandal has already cost the company $16 billion in civil settlements in the U.S., but more problems await Volkswagen in Europe where it sold most of its 11 million cars.

Bad Testing

The common problem with Volkswagen's cars, which includes numerous models made between 2009 and 2016, is a sensor called a "defeat device." Basically, it detected when a car was being tested and activated components to change emissions.

After test problems surfaced in May 2014, the California Air Resources Board engaged researchers at West Virginia University to investigate. They found that some cars actually emitted nearly 40 times the legal levels of nitrogen oxides.

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