The Obama administration accused Volkswagen on Friday of a stunning scheme to deceive the government about its cars’ emissions standards and ordered the German automaker to recall nearly 500,000 vehicles.
But as the White House begins investigating Volkswagen's practices, will it prosecute top executives of the company that's accused of deceiving the government and endangering public health?
The case provides an opportunity for the Department of Justice to deliver on a promise it made in a Sept. 9 memo to refocus its prosecution of white-collar crime on individual employees, rather than the institutions that employ them, and to pressure companies to cooperate in those efforts.
The DOJ memo, which The New York Times obtained, was an implicit response to criticism that the administration has avoided pursuing cases against individual white-collar criminals, preferring instead to strike deals with the companies that employ them. These deals typically result in substantial fines, but preclude jail time for individuals.
Critics have been especially unforgiving of what they see as the administration’s milquetoast policing of Wall Street: Not a single top finance executive has gone to prison for their role in the 2008 financial crisis. (Last year, the Times profiled Kareem Serageldin, a mid-level Credit Suisse banker who went to jail for lying about the value of his bank's mortgage securities.)
The Environmental Protection Agency on Friday issued Volkswagen a notice of violation for allegedly cheating emission-control standards. The company installed software in its diesel-powered vehicles that turned on their emissions control systems when the cars were inspected by state authorities, but otherwise left the cars free to emit 40 times the legal limit of nitrogen oxide. The chemical adds to the buildup of smog and ozone, which are tied to asthma and other respiratory illnesses and contribute to shortened lifespans. Volkswagen may have been trying to improve its cars’ performance, since the emissions control systems apparently limit torque and acceleration.
Volkswagen admitted to installing the software, the EPA said.
The EPA called Friday’s notice and recall an “opening salvo” in a larger investigation of wrongdoing on which it is collaborating with the DOJ and the state of California. Volkswagen said it was cooperating in the investigation.
If there is enough evidence that Volkswagen deliberately committed fraud, the case could be an ideal test for the DOJ’s professed rededication to the prosecution of individual corporate executives.
"This is a huge test of how serious the administration’s commitment is to prosecuting white collar crime," Tyson Slocum, director of the energy program at consumer advocacy group Public Citizen, told The Huffington Post. "If the facts end up showing that Volkswagen executives deliberately designed and implemented a program to evade emissions testing, that is a brazen act and there has to be some accountability. It cannot just be yet another instance of Volkswagen opens up its checkbook and writes a check of shareholders' money to pay a fine. There has to be prosecution of executives involved in such a scheme."
"This was not some mid-level thing," he added. "If it proves to be true, it was an illegal conspiracy to cheat emissions testing."
Lawyers specializing in automotive law told Bloomberg that if DOJ agrees with EPA claims about the device to cheat emissions inspections, it will have grounds to charge Volkswagen with criminal violations of the Clean Air Act.
But even if the DOJ pursues charges against individual Volkswagen executives, we may not be seeing company CEO Martin Winterkorn in handcuffs anytime soon.
One of the reasons prosecutors are reluctant to charge employees in white-collar crime cases is that individual responsibility is hard to prove. And when they do choose to prosecute individuals, they have more success catching lower-level workers who take the fall for the executives calling the shots.
Senior executives are adept at concealing any evidence that might implicate them in wrongdoing done at their behest, Brandon Garrett, a law professor at the University of Virginia and author of Too Big To Jail: How Prosecutors Compromise With Big Corporations, told HuffPost Live earlier this month.
“Like any mafia don you do not want to have a smoking gun: You do not want to e-mail illegal instructions to your underlings, you do not want to leave a paper trail,” Garrett said. “And that can make it possible for CEOs to hide their true role.”
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