FCA diesel exec indicted in emissions cheating case

Keith Laing Robert Snell
The Detroit News

Fiat Chrysler Automobiles NV's senior manager of diesel engine calibration has been indicted on charges related to the company's use of software on about 104,000 diesel-powered pickups and SUVs that is similar to the “defeat devices” Volkswagen AG used to cheat U.S. emissions testing. 

Emanuele Palma, 40, of Bloomfield Hills is facing charges of violating the Clean Air Act, wire fraud, false statements and aiding and abetting FCA's efforts to defraud car buyers by cheating federal emission standards over a period stretching from roughly 2010 to April 2017, according to the indictment filed in U.S. District Court for the Eastern District of Michigan. 

The federal indictment comes as prosecutors in Germany charged Volkswagen CEO Herbert Diess, former CEO Martin Winterkorn and Supervisory Board Chairman Hans-Dieter Pötsch with misleading shareholders in the days and weeks after its diesel-cheating scandal burst into public view in 2015.

The U.S. government alleges that Palma, along with other FCA employees, did "knowingly, intentionally, and willfully combine, conspire, and confederate, and did agree, to mislead FCA’s Regulators, customers, and the public, by making and causing others to make false and misleading representations about the design, calibration, and function of the emissions control systems" used on FCA diesel vehicles. 

In particular, prosecutors allege Palma "purposefully calibrated the emissions control system to produce lower NOX emissions under conditions when the subject vehicles would be undergoing testing."

Additionally, the FCA executive is accused of "making false and misleading representations to FCA’s Regulators both in person and in response to written requests for information" and "causing false and misleading representations to be made to the public about the subject vehicles." 

A handcuffed Palma, wearing a scowl, 5 o'clock shadow and a gray hoodie, was arraigned and released on $10,000 unsecured bond after surrendering his Italian passport.

Assistant U.S. Attorney Timothy Wyse wanted Palma to wear a GPS tether, saying he is a flight risk facing 20-year felonies. U.S. Magistrate Judge Elizabeth Stafford refused, citing the Fiat Chrysler manager's job and family ties to Metro Detroit.

Palma has been under investigation for three years and traveled extensively, but always let the government know his whereabouts, his lawyer, Kenneth Mogil, said: "I am extremely confident that there is zero risk of flight. I bet my bar card. We intend to defend this vigorously."

Wyse said Palma was the lead manager and lead engineer on a team producing deceptive software for more than 100,000 vehicles that cheated U.S. emissions testing. "As a result of his engineering decisions and lies," the prosecutor said, the vehicles emitted dramatically higher levels of pollutants than allowed by law.

In a statement, FCA said: "We continue to fully cooperate with the authorities, as we have throughout this issue. We refer you to previous statements we have made on this matter and have nothing else to add at this time." 

In January, FCA was forced to pay about $800 million to settle allegations from federal regulators that the company used the software on about 104,000 diesel-powered pickups and SUVs. The settlement required the Italian-American automaker to pay $515 million in civil penalties to the Justice Department, Environmental Protection Agency and California Air Resources Board.

That figure includes $305 million in fines, $185 million for recalls and repairs, $19 million to California to mitigate violations of that state's environmental laws, and $6 million to U.S. Customs and Border Protection to resolve allegations of illegally importing 1,700 non-compliant vehicles.

As part of the settlement, FCA agreed to pay $72.5 million to a group of 52 local jurisdictions that includes Michigan and 48 other states, as well as Puerto Rico, Guam and Washington, D.C. Attorney General Dana Nessel said $2.1 million of the local money was earmarked for Michigan.

In a separate settlement with a steering committee that was set up to represent drivers affected by the alleged emission cheating, FCA agreed to pay $280 million to compensate drivers of Jeep Grand Cherokees and Ram 1500 pickups equipped with 3-liter V-6 diesel engines from the 2014-16 model years.

German auto supplier Bosch, which designed the software for FCA, was forced to pay $27.5 million as part of the plaintiffs' settlement. Bosch agreed to pay $2.7 million to Michigan. 

Drivers of the affected models were eligible to receive as much as $2,800 each under the settlement. FCA will be subjected to additional penalties if at least 85% of the affected vehicles are not repaired within two years of the final court approval of the proposed settlement. 

FCA was not required to admit any wrongdoing as part of the settlement and the company is not required to buy back any of the affected vehicles. 

In the Volkswagen case, six present and former company executives are charged 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. VW was also forced to pay $2.8 billion in criminal fines and $1.5 billion in civil penalties related to the fraud.

Heinz-Jakob Neusser, 56; Jens Hadler, 50; Richard Dorenkamp, 68; Bernd Gottweis, 69; Oliver Schmidt, 48; and Jürgen Peter, 59, all of Germany, were indicted in January 2017 and charged with one count of conspiracy to defraud the United States by a federal grand jury in the Eastern District of Michigan. James Robert Liang, leader of diesel competence for VW from 2008 through June, pleaded guilty to a criminal charge in September 2016 for his role in the automaker’s diesel emissions scandal.

Staff Writer Robert Snell contributed.