Labor leader resigns union posts amid sexual assault investigation

VW engineer’s guilty plea could signal more indictments

Jennifer Chambers, Michael Wayland, Melissa Burden, and Robert Snell

Detroit — A veteran Volkswagen AG engineer’s guilty plea to a criminal charge Friday for his role in the automaker’s diesel emissions scandal has uncovered new revelations of a decade of deceit and coverups.

Federal documents unsealed Friday detail how VW engineers from the very beginning of the automaker’s so-called “clean diesel” program intentionally developed and installed a “defeat device” on roughly 500,000 cars from 2009 through 2015 in the United States so that they could appear to pass U.S. emissions tests.

The details were made public as James Robert Liang, leader of diesel competence for VW from 2008 through June, appeared in U.S. District Court in Detroit. He entered a guilty plea to a grand jury indictment of conspiracy to defraud the U.S. government, to commit wire fraud and to violate the Clean Air Act. The maximum penalty is five years in prison and a $250,000 fine.

It marks the first criminal charge in the year-long scandal at the German automaker and could indicate more charges against VW officials are coming in the Department of Justice investigation into the company.

The 10-year conspiracy unfolded in 2015 and is expected to cost the automaker billions. The company admitted to lying on emissions tests for roughly 11 million diesel vehicles worldwide, including about 500,000 in the United States. VW has already agreed to pay $16.5 billion to consumers and dealers as a result of the scandal. It continues to face a civil Justice Department lawsuit in Detroit and a class-action lawsuit in California.

Federal prosecutors in Detroit declined to comment on whether other VW employees will be charged or indicted. However, Liang’s cooperation with the ongoing investigation likely indicates “co-conspirators” referenced in the documents could be charged.

“This is important because he’s admitting to a conspiracy, and of course you have to have someone else with you conspire,” said Peter Henning, a Wayne State University law professor and former federal prosecutor. “The interesting question is who in Germany can he identify and testify against.”

In a plea agreement with the government signed Aug. 31 by Liang, 62, of Newbury Park, Calif., prosecutors say in exchange for his agreement to cooperate with the government, it agrees not to use new information about Liang’s own criminal conduct against him at sentencing.

Henning said Liang can give prosecutors “a road map” of who was involved in the scandal. The Justice Department last year implemented new guidelines that call for linking individual accountability as part of corporate investigations.

In recent Justice Department automaker probes, no General Motors Co. executives were charged in the company’s failure to disclose ignition switch defects linked to 124 deaths. Nor were executives from Toyota Motor Corp. indicted over its coverup of unintended acceleration issues. It’s unknown what will happen in ongoing federal probes into Fiat Chrysler Automobiles NV over reporting of U.S. monthly sales.

“The feds are cracking down hard on companies for cheating of all kinds as of late,” Autotrader senior analyst Michelle Krebs said.

Criminal conspiracy

In court Friday, Assistant U.S. Attorney Mark Chutkow said Liang knew two or more of his colleagues engaged in the same criminal acts, and that Liang emailed co-workers in the United States and Germany from 2012 to 2015 to further the conspiracy.

Liang and others, according to federal documents, at least twice attempted to cover up the existence of the defeat device.

Inside VW, the defeat device was referred to in language that obscured its purpose: It was known as the “acoustic function,” “switch logic,” “cycle beating” software or “emissions-tight mode,” documents say. When the cars were being tested by the government in laboratory conditions, the emissions control system worked properly; but out on the open road, software disabled that system.

After warranty claims shot up for parts and components related to emissions control systems, a 2014 software update to “improve” vehicles was used in part to “enhance the defeat device” so that it didn’t stay in test mode too long, according to court documents. As a result of that update, cars better sensed when they were out on the open road and deactivated those pollution-control devices.

Regulators have said that in normal driving the cars emitted up to 40 times more smog-causing nitrogen oxide than the legal limit.

After federal regulators brought up irregularities in emissions testing by an outside entity, Liang and others in spring 2014 discussed how they could address questions from the California Air Resources Board about the differences.

Those discussions, according to the plea deal, led to “fraudulent explanations” that eventually led to a voluntary recall in early 2015 that intended to “fix” the issues that were causing the discrepancy. Prosecutors say Liang and his co-conspirators knew that the update would lower emissions but not remove the defeat device software.

As part of his plea, Liang admitted he helped others continue to lie to federal and state regulators and customers even after regulators started to have concerns about diesel vehicles’ road performance.

“I knew that VW did not disclose defeat device to regulators in order to get certification,” he said in open court.

Liang was also indicted for violating the Clean Air Act, which includes a two-year prison term and $250,000 fine. But under a plea agreement with the Justice Department, he did not enter a plea to that charge.

Detroit investigation

Chutkow, who was lead prosecutor in the racketeering conspiracy case against former Detroit Mayor Kwame Kilpatrick, said during a June court hearing that there are two terabytes of discovery material. That’s enough material to fill an academic research library.

Liang is not a U.S. citizen, and his conviction on the charges could affect his eligibility to remain in the United States, U.S. District Judge Sean Cox said. Liang is scheduled to be sentenced at 2 p.m. Jan. 11 before Cox.

He had been arraigned June 9 in federal court, and though the courtroom was open, the audio file and related court documents were sealed until Friday. He was free on $10,000 unsecured bond but was subject to a curfew and GPS monitoring.

In October, The Detroit News reported that the U.S. Attorney’s Office in Detroit was helping lead an investigation into the emissions scandal. The office is part of the massive federal investigation that is also being led by the Justice Department's Environment and Natural Resources Division. Federal prosecutors and FBI agents in California — where VW has pollution testing labs — also are involved.

The Detroit office of the FBI last year also was leading the investigative team. The Environmental Protection Agency’s testing labs are in Ann Arbor.

Volkswagen has engineering offices in Auburn Hills that are responsible for preparing and submitting documents for federal regulators to be able to sell Volkswagens in the U.S. The company dating back to 2008 certified with the EPA and the California Air Resources Board that several VW vehicles met emissions requirements.

Staff Writers Robert Snell and Keith Laing contributed.