2nd VW employee arrested over emissions scheme

Detroit News staff and wire reports

Detroit — A Volkswagen executive once responsible for the company’s compliance with U.S. emissions regulations has been charged in a criminal complaint unsealed Monday for his role in a nearly decade-long conspiracy to defraud federal regulators by cheating on U.S. emissions tests.

Oliver Schmidt, former general manager of the Engineering and Environmental Office for VW of America, was charged with one count of conspiracy to defraud the United States to commit wire fraud and violate the Clean Air Act.

The 48-year-old German was arrested Saturday in Miami, Florida, and made an initial appearance Monday before federal Magistrate Judge William C. Turnoff in the U.S. District Court for the Southern District of Florida, said Timothy Wiley, a spokesman for the FBI’s Detroit office.

He was ordered held at the Miami hearing at which prosecutors argued he posed a flight risk if released. He faces another hearing Thursday. After that he likely will be taken to Detroit, where the Justice Department investigation is based.

Schmidt is the second VW employee to be arrested as the probe led by the U.S. Attorney’s Office in Detroit continues. He likely will be taken to Detroit to face arraignment at a later date. James Robert Liang, a veteran Volkswagen AG engineer and leader of diesel competence for VW from 2008 through June, pleaded guilty in the fall to charges connected to the scandal.

Federal authorities said the VW engineer was a party to the implementation of software specifically designed to cheat U.S. emissions tests in hundreds of thousands of Volkswagen “clean diesel” vehicles.

FBI’s Detroit Office and the EPA-Criminal Investigation Division are investigating the case. The charges were announced Monday by Assistant Attorney General Leslie R. Caldwell of the Criminal Division, Assistant Attorney General John C. Cruden of the Environment and Natural Resources Division and U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan.

The newly unsealed complaint, dated Dec. 30 and signed by FBI Special Agent Ian M. Dinsmore, alleges Schmidt, who had been stationed in Auburn Hills managing the environmental office, committed the crimes from 2012 to 2015.

In the role, he was primarily responsible for communicating and coordinating with U.S. regulatory agencies, including the U.S. Environmental Protection Agency and the California Air Resources Board, federal authorities said.

In March 2015, Schmidt was promoted as a principal deputy of a senior manager for the automaker and returned to VW headquarters in Wolfsburg, Germany, where he played a direct role in VW’s response to U.S. regulators’ questions.

By that summer, the filing notes, U.S. regulators had discovered “VW diesel vehicles emitted substantially higher emissions when being driven on the road than when undergoing standard U.S. emissions tests, and had repeatedly asked VW for an explanation for this discrepancy.

“Schmidt knew that the reason for this discrepancy was that VW had intentionally installed software in the diesel vehicles it sold in the United States from 2009 to 2015 designed to detect and cheat U.S. Emissions tests,” the complaint reads.

But still, authorities allege Schmidt continued to deceive regulators by offering reasons for the discrepancy other than the fact that VW was intentionally cheating in order to allow sales to continue.

Volkswagen has admitted that it programmed diesel-powered vehicles to turn pollution controls on during tests and to turn them off in real-world driving. The scandal has cost VW sales and has tarnished its brand worldwide.

On Monday, Volkswagen in a statement to The Detroit News said it “continues to cooperate with the Department of Justice as we work to resole remaining matters in the United States.”

Peter Henning, a Wayne State University law professor and former federal prosecutor, wonders how many up the chain of command will become entangled by the investigation.

“The thing that struck me is they’ve gotten cooperation from some Volkswagen people in Europe. Those agreements were not to prosecute them. So they are concentrating on higher ups inside the company. That now becomes a question of how high up can they go?”