German automaker Volkswagen Group admitted to flagrant violations of U.S. consumer and environmental laws in 2016, and agreed to pay $17.4 billion for rigging more than a half million vehicles to evade pollution regulations, deceiving customers and lying to the government about its unlawful conduct.
Volkswagen’s stark admission and the huge legal settlements, which funnel unprecedented resources into programs to reduce air pollution and compensate car owners, were the result of a painstaking investigation led by Phillip Brooks and Byron Bunker of the Environmental Protection Agency and Josh Van Eaton from the Department of Justice.
The three men, each with separate expertise in the regulatory, technical and legal aspects of the inquiry, led teams of scientists, engineers and attorneys who gathered the facts and built a rock-solid case documenting blatant violations of the Clean Air Act. The team conducted lengthy negotiations resulting in the largest penalty ever assessed against a car manufacturer. Their inquiry also helped lay the foundation for subsequent criminal investigations that have resulted in indictments against senior Volkswagen executives and a total of $4.3 billion in civil and criminal penalties and fines.
Other settlements with Volkswagen involved U.S. Customs and Border Protection to address import violations, and the Federal Trade Commission, which filed a separate complaint against the company for false advertising.
The case was extremely difficult and complex, but the three men showed a “doggedness” to get to the truth and hold Volkswagen accountable, said Cynthia Giles, a former assistant administrator at the EPA. The trio “never wavered from the bottom-line goal of solving the public health threat,” she said, and insisted that VW not just comply with the law, but also admit to its wrongdoing and pay penalties commensurate with the harm caused.
The case had its genesis in 2014 when an independent organization comparing emissions of European and American diesel engines found that Volkswagen diesels were emitting up to 40 times more nitrogen oxide when driven on the road than when tested in the laboratory. When the EPA pressed VW for an explanation, the company agreed to recall some vehicles, but insisted that the results were merely technical glitches.
After further testing showed that there was still a disparity between lab and on-road emissions, the EPA and the California Air Resources Board, which enforces its own stringent environmental standards, withheld certification for VW’s 2016 vehicles until the issue was clarified.
With the looming threat of being barred from selling diesel vehicles in the U.S. because of the high pollution levels, Volkswagen admitted that the issue was not a technical problem or an innocent mistake, but that the company had installed software intentionally to fool regulators on true emission levels that violated federal standards. The devices used by VW detected when a car was being tested in a lab and lowered emissions to legal levels to comply with the law.
“The company officials chose not to come clean until they realized they couldn’t sell vehicles in the U.S. and it would be a big problem,” said Bunker.
Prior to the first legal settlement, but after EPA had enough facts in hand, agency officials issued a notice of clean air violations accusing VW of causing tons of nitrogen oxide to enter the atmosphere. The revelation prompted cars owners around the country to file some 500 class-action lawsuits claiming they were deceived into buying polluting cars they thought were environmentally friendly. Numerous states and car dealers also filed lawsuits.
“I knew this would be a big deal, but I had no idea how big,” Bunker said. “The owners felt misled and complicit. It was a personal thing for them. People were embarrassed to be driving Volkswagens.”
Bunker directs the EPA office that conducts tests to ensure compliance with clean air regulations, and helped nail down the details of the violations by the company. Brooks leads the EPA air quality enforcement office and Van Eaton is a trial attorney who took charge of the civil litigation. Together, they developed enforcement, legal and negotiation strategies, and spent months going toe-to-toe with the company until they agreed to a comprehensive and stringent settlement.
John Cruden, a former assistant attorney general, said Van Eaton “became an expert on the law of emissions for trucks, cars and diesel engines,” coordinated the litigation, and kept five federal agencies, and the states and attorneys handling the class-action lawsuits, apprised of the proceedings.
Janet McCabe, a former acting EPA assistant administrator, said the three men and their colleagues were dedicated to ensuring that the law was enforced. After six months of lengthy negotiations, during which “people were willing to stand up and walk out of the meetings,” she said, the government and Volkswagen agreed on a settlement that addressed the violations of the law, mitigated environmental damage and compensated individual car owners.
Brooks said the team hopes that the impact of the settlement “will pay dividends for years to come.” He said the EPA has already changed testing procedures to prevent deception, allowing them to more effectively enforce regulations.
“The level of deception, cover-up and subsequent behavior here really offends your moral compass,” Van Eaton said. “This was an opportunity to do something historic and also achieve a great result for the environment and our country.”