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3 States Charge VW Execs With Fraud in New Lawsuits

July 20, 2016

By Gregory Arroyo

Photo Courtesy of Volkswagen
Photo Courtesy of Volkswagen
NEW YORK — State regulators in three states have file lawsuits against Volkswagen AG, its affiliates, Audi AG and Porsche AG, and the automaker’s American subsidiaries for selling diesel-powered vehicles fitted with illegal emissions “defeat devices” and then allegedly attempting to cover up their behavior.

New York Attorney General Eric Schniederman, Massachusetts Attorney General Maura Healey, and Maryland Attorney General Brian Frosh announced their lawsuits on Tuesday. The complaints charge that Volkswagen sold 25,000 vehicles equipped with emissions control defeat devices in New York, 15,000 in Massachusetts, and 12,935 in Maryland.

“The allegations against Volkswagen, Audi and Porsche reveal a culture of deeply-rooted corporate arrogance, combined with a conscious disregard for the rule of the law and the protection of public health and the environment,” Attorney General Schneiderman said, adding that the suits should “serve as a siren in every corporate board room.”

Attorney General Healy added, “Volkswagen, Audi and Porsche defrauded thousands of Massachusetts consumers, polluted our air, and damaged our environment, and then, to make matters worse, plotted a massive cover-up to mislead environmental regulators.”

The lawsuits follow a nine-month investigation by a coalition of 40 states and other jurisdictions. Also involved in the probe were the New York State Department of Environmental Conservation, the Massachusetts Department of Environment Protection, and Maryland’s Department of the Environment.

The complaints allege a cover-up Volkswagen and Audi allegedly managed for nearly a year and a half. It followed a study by researchers at West Virginia University that alerted U.S. authorities that these diesel cars emitted more nitrogen oxides when driven on the road than they did when undergoing emissions testing by the U.S. Environmental Protection Agency (EPA) and the California Air Resource Board (CARB).

The lawsuits allege that after the EPA and CARB contacted the car companies about the discrepancies revealed by the West Virginia University study, Audi and Volkswagen tried to cover up the problem through recalls they allegedly knew would not meet required standards. The suit also charges that the companies failed to disclose to regulators the true reason for the discrepancies and only confessed to the defeat devices when they knew regulators “had them pinned to the facts.”

The lawsuits also charge that the cover-up was orchestrated and approved at the highest levels of the company, up to and including former CEO Martin Winterkorn. However, the regulators note in their announcement that not a single Volkswagen, Audi or Porsche employee came forward to blow the whistle.

The suits also follow the car companies’ partial settlements of claims for consumer relief and consumer deception penalties, as well as their agreement to establish a fund to mitigate the environmental damage caused by the cheat device. Those settlements, however, did not resolve any of the claims for civil penalties that New York, Massachusetts and other states, as well as the EPA, may bring for the companies’ alleged violations of state and federal environmental laws and regulations. The settlements also don’t cover all the vehicles equipped with the cheat device.

The suits specifically claim that Volkswagen made a knowing decision to repeatedly violate state laws in New York, Massachusetts, Maryland and other states, the complaints noting that the affiliated brands produced not just one defeat device but six dating back to the mid-2000s. It also alleges that Volkswagen and Audi researched U.S. laws and previous enforcement cases before they did.

“As our complaint sets out, Volkswagen, Audi and Porsche installed defeat devices in their cars to trick regulators and to deceive the public, and they did so knowing that their conduct was illegal and their misconduct hindered our efforts to clean the air and to clean the Chesapeake Bay,” said Attorney General Frosh. “Their disregards for the health of our citizens and their disregard for our environment must be punished.”

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