Friday, January 08, 2016
DOJ Sues VW
The Department of Justice sued Volkswagen on Monday for violations of the Clean Air Act. The suit arises from the revelations that VW cheated on diesel engine products by installing "defeat devices" that could detect when the car was being tested for emissions. The devices allowed the cars to emit 40 times more nitrogen oxide than allowed under US emissions standards. Nitrogen oxide is a major component of smog. The suit seeks $18b in civil penalties as well as injunctive relief. Such suits against corporate wrongdoing are typically settled for a fraction of the theoretical maximum. For example US authorities sued Toyota for up $58b for environmental violations at the beginning of this century, but agreed to a settlement of about $34m. The complaint claims emission control systems were rigged in nearly 600,000 vehicles in the United States. DOJ alleges that VW installed the software systems intentionally and that their action has significant consequences for public health; although in a civil suit no proof of the company's intention is required. Previous company admissions about the cheating make a viable defense on the merits almost impossible. A criminal fraud prosecution is not precluded by the civil action. VW's stock fell 22% below pre-scandal levels on the news of the suit, Tuesday.