Detroit — A stiffer-than-expected sentence Friday for a “brilliant” Volkswagen engineer who helped perpetuate a $25 billion diesel emission scandal helps atone for the perception that business leaders and executives receive free passes for corporate wrongdoing, legal experts said.
VW engineer James Liang’s 40-month sentence and $200,000 fine for his role in a worldwide scandal that defrauded American consumers could foreshadow tough treatment for seven other executives charged in the scandal, including one awaiting sentencing in December.
The tough sentence from U.S. District Judge Sean Cox makes it more likely VW executives indicted in January will remain in Germany and not be brought to justice, experts said.
“It sends a very strong message to them that they better stay safely in Germany,” said Peter Henning, a Wayne State University law professor and former federal prosecutor. “We haven’t seen many individuals being held responsible for corporate misconduct, so this is one of those rare cases.”
Liang, 63, who helped devise software that cheated emissions tests and lied to government regulators, is the first person sentenced to federal prison in the scandal. He struck a plea deal with prosecutors in September and helped investigators unravel the scandal.
The sentence was surprising considering that prosecutors recommended Liang spend three years in federal prison and pay a $20,000 fine. Defense lawyers wanted Liang sentenced to home confinement and a nominal fine, arguing the 120-pound man was too old and slight to serve time in a federal prison.
“Judge Cox dropped the hammer in a way that I don’t think anyone expected,” Henning said.
The judge faulted Liang for conspiring in a scandal that eroded trust between American consumers and car companies.
“The conspiracy perpetrated a massive … and stunning fraud on the American consumer that attacked and destroyed the very foundation of our economic system,” Cox told Liang. “It was a very serious and troubling crime.
“Your cooperation and regret is noted,” the judge told Liang on Friday, “but it doesn’t excuse your conduct.”
Liang, who faces deportation to Germany upon his release from prison, did not react to the sentence and declined an opportunity to address the judge.
Defense lawyer Daniel Nixon portrayed the VW engineer as a remorseful man subject to public shaming as the “worldwide face” of the scandal. “This is not a greedy or immoral man,” Nixon told the judge. “He wasn’t the mastermind. He was blindly — blindly — executing misguided loyalty to his employer.”
Prosecutors had urged a 36-month sentence, arguing it would deter automobile industry engineers from committing similar crimes. “Others in Liang’s situation will think twice before following in his footsteps,” Assistant U.S. Attorney Mark Chutkow said. “ ‘Doing my job’ is not a proper excuse.”
Liang was the point-person for VW in the United States, prosecutors said, calling him “brilliant.”
“He was the one person who knew what was going on,” Chutkow said. “Liang could have walked away. He could have protested … he could have blown the whistle. But he didn’t do those things.”
Besides Liang, seven other current and former Volkswagen AG executives are facing charges related to the scandal.
They are: Zaccheo Giovanni Pamio, 60; Heinz-Jakob Neusser, 56; Jens Hadler, 50; Richard Dorenkamp, 68; Bernd Gottweis, 69; and Jürgen Peter, 59; and Oliver Schmidt, 48, all of Germany.
Last month, Schmidt struck a plea deal that recommends a seven-year sentence.
As he illustrated Friday, Cox can exceed that sentence.
“I think the judge sent as signal that corporate irresponsibility will not be tolerated,” University of Detroit Mercy law professor Larry Dubin said Friday. “There has been a lot of criticism about the criminal justice system and not holding corporations and their executives and employees responsible for criminal acts that caused the major recent recession. The judge is making a statement that that should not be the case with Volkswagen.”
Liang, a German citizen, made $350,000 a year and lived a comfortable life in a 3,600-square-foot home in an exclusive California community, the judge noted.
“And, of course, VW paid the rent,” the judge said. “You didn’t want to walk away from this lifestyle. You were loyal. Arguably too loyal.
“You were an important and key player in a very serious crime,” the judge added.
Volkswagen was charged as a company with three criminal felony counts for what regulators called a “10-year conspiracy” to rig hundreds of thousands of diesel cars to cheat U.S. emission standards. It was forced to pay $2.8 billion in criminal fines and $1.5 billion in civil penalties related to the fraud.
The automaker has been under fire in the United States since it was accused by the U.S. Environmental Protection Agency in September 2015 of selling diesels for years with software that activated required air pollution equipment only during emissions tests. They had been marketed as “clean diesels” for the company’s Volkswagen, Audi and Porsche brands between 2008 and 2015.
Volkswagen has admitted to programming its diesel cars to trick emissions testers into believing the engines released far less pollution into the air than they actually do, in violation of the federal Clean Air Act. Regulators have said that in normal driving they emitted up to 40 times more smog-causing nitrogen oxide than the legal limit.
The $4.3 billion fine comes in addition to a $14.7 billion settlement the company reached this year with the EPA that calls for Volkswagen to spend $10 billion to either buy back or repair about 475,000 2-liter diesel vehicles that were sold between 2009 and 2015 and were built with devices to trick emissions testers; the company must contribute $4.7 billion to federal efforts to reduce pollution.
The company also agreed to $1.2 billion deal that covered fixes and buy-backs of 78,000 additional 3-liter cars.