Feds allege broader diesel conspiracy at FCA that defrauded buyers

Robert Snell
The Detroit News
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Detroit — Federal prosecutors Tuesday unsealed new criminal charges against three Fiat Chrysler Automobiles NV officials accused of conspiring to cheat federal emissions tests and deceived consumers about the fuel efficiency of more than 100,000 diesel vehicles.

The years-long conspiracy is outlined in an unsealed indictment of diesel senior manager Emanuele Palma, 42, of Bloomfield Hills and two Italian nationals who work for FCA Italy SpA, the Italian subsidiary of what is now Stellantis NV. They are senior diesel managers Sergio Pasini, 43, of Ferrera, Italy, and Gianluca Sabbioni, 55, of Sala Bolognese, Italy, who were responsible for developing and calibrating a 3.0-liter diesel engine used in FCA vehicles, including the Jeep Grand Cherokee and Dodge Ram 1500 models starting in 2014.

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The indictment describes a six-year scheme that started in December 2011 and involved conspirators knowingly misleading federal regulators about the design, calibration and function of emissions control systems. The alleged cheating involved deliberately calibrating emissions control functions to produce lower emissions during regulatory testing and higher emissions during actual driving conditions.

Prosecutors said the trio and co-conspirators coined a phrase for the scheme: "cycle beating." The scheme was designed to obtain regulatory approval to sell vehicles in the U.S., boost sales and enrich the conspirators, prosecutors said.

"We continue to fully cooperate with the Department of Justice, as we have throughout this issue," company spokeswoman Shawn Morgan wrote in an email Tuesday.

The indictment was unsealed 18 months after Palma was first charged with federal crimes, and coincided with a separate federal crackdown on corruption within the U.S. auto industry, particularly the United Auto Workers. The corruption investigation has led to 15 convictions, including former Fiat Chrysler Vice President Alphons Iacobelli and two former presidents of the United Auto Workers union.

Palma's lawyers did not respond immediately to a message seeking comment. Lawyers for Pasini and Sabbioni are not identified in court records. A spokeswoman for the U.S. Attorneys Office in Detroit said the men were not in custody.

The original 13-count indictment against Palma suffered a setback in November when U.S. District Judge Nancy Edmunds dismissed four wire fraud charges.

The indictment unsealed Tuesday charges Pasini and Sabbioni with one count of conspiracy to defraud the U.S. and to violate the Clean Air Act; one count of conspiracy to commit wire fraud and six counts of violating the Clean Air Act. The most severe charge, wire fraud conspiracy, is punishable by up to 20 years in federal prison.

Palma, meanwhile, is facing one count of conspiracy to defraud the U.S. and to violate the Clean Air Act, one count of wire fraud conspiracy, six counts of violating the Clean Air Act and two counts of making false statements to federal investigators.

Palma is portrayed as a lying, self-congratulating fraudster. Prosecutors say he sent an email to Pasini and other, unidentified co-conspirators in January 2014 after passing tests mandated by the U.S. Environmental Protection Agency.

“Best in class,” Palma wrote in the email, “great job.”

The cheating scandal was profitable. From January 2013 to September 2017, customers spent approximately $4 billion on more than 100,000 vehicles equipped with the diesel engine.

In October, FCA executives disclosed the probable loss for a federal criminal settlement over allegations of cheating on diesel emissions tests to be almost $259 million. The company previously paid $800 million in related civil penalties to several government agencies and payments to drivers with affected models. 

In September, Fiat Chrysler also agreed with the Securities & Exchange Commission to pay $9.5 million to settle allegations that it misled investors in 2016 on the matter. It did not require FCA to admit guilt.

The company did admit guilt in a separate corruption scandal involving Iacobelli and the UAW. In March, the automaker pleaded guilty to one count of conspiracy to violate the Labor Management Relations Act and agreed to pay a $30 million fine to settle a criminal investigation into auto executives breaking federal labor laws.

The fine is part of a broader settlement with federal authorities that includes the appointment of an independent monitor for three years to oversee company compliance with labor laws and oversee dissolution of a joint training center the United Auto Workers operated with Fiat Chrysler, now part of Stellantis NV.

Come back to www.detroitnews.com for more on this developing story.

rsnell@detroitnews.com

Twitter: @robertsnellnews

Staff Writer Breana Noble contributed.

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