Volkswagen is in hot water. News broke recently that it has been putting
“defeat devices” in millions of diesel cars to make them seem
much cleaner than they really are. The defeating software Volkswagen used
caused their cars to register excellent results in emissions tests, while
the cars were actually emitting up to 40 times more pollutants in everyday
driving. That means more smog in the air, more asthma and other respiratory
diseases, and so on.
The fraud is so huge that it’s hard to get your head around it. It
has been going on for about a decade, and involves popular diesel models
such as Jettas, Beetles, Golfs, and Passats. Half a million cars sold
in the U.S. may have the deceptive software, and there may be as many
as 11 million cars with it worldwide.
It’s virtually impossible that this could have happened by accident.
There are just too many bogus test results, in too long a period of time,
and involving too many models. Some automotive experts believe this could
not have happened unless people throughout VW’s hierarchy were in
on it. Company CEO Martin Winterkorn claims innocence, but he stepped
down almost immediately after the story went public.
Consumers who thought they were doing the right thing for the environment
by getting cars marketed as “clean diesel” are understandably
enraged. Besides being duped, they now have cars which are less valuable
than they thought. A class action, or several class actions, are now a
foregone conclusion. VW has already set aside $7.3 billion to deal with
the recall and related fallout, but the eventual fines, penalties, and
other financial consequences could be much higher.
The more interesting question now is the one about white collar crime.
The U.S. Justice Department, hit with withering criticism for its “fines
only” approach to corporate crime, recently announced a change in
policy. It says it will no longer provide credit for cooperation unless
corporate criminals “provide all relevant facts about the individuals
involved in corporate misconduct.” Justice investigators are now
supposed to “focus on individuals” right from the beginning
of their investigations. Perhaps most importantly, the Department is no
longer supposed to agree to plea deals which require dismissal of charges
against individual officers or employees of corporations.
The systemic emissions fraud by VW is tailor-made for application of this
new policy. It will be interesting to see if the Department puts its money
where its mouth is and actually follows its own guidelines. If it does,
it will put large corporations everywhere on notice, and it may actually
change behavior in the long run. If it doesn’t, then this will end
up being just another “cost of doing business” episode like
the Deepwater Horizon disaster, the global bank HSBC money-laundering
scheme, and the GM ignition switch coverup. Stay tuned!