Engineer tells court auto maker cheated because vehicles could
not meet U.S. rules
By Aruna Viswanatha and Christina Rogers
A Volkswagen engineer pleaded guilty to helping the auto maker's
admitted efforts to cheat on emissions tests, becoming the first
person criminally convicted in the U.S. in a wide-ranging scandal
that has cost the German giant billions of dollars.
The engineer, James Liang, who has been with the company since
1983, agreed to cooperate in the continuing U.S. investigation,
according to his plea agreement filed in federal court in Detroit.
That cooperation suggests prosecutors are preparing cases against
others at the company.
Mr. Liang was charged with conspiring to defraud the U.S.,
commit wire fraud and violate the Clean Air Act. He is scheduled to
be sentenced in January, and faces up to five years in prison and a
fine of up to $250,000. He also has been mentioned in a civil suit
as being a developer of devices that helped certain models appear
to burn cleaner in emissions tests than they did on the road.
The plea marks the first time an individual has faced sanctions
in the sprawling U.S. investigation into the emissions scandal.
Volkswagen AG remains in discussions with the U.S. on a criminal
settlement and is expected to face a financial penalty as part of
that investigation, people familiar with the matter have said.
A company spokeswoman said Volkswagen is continuing to cooperate
in the investigation but wouldn't comment on Mr. Liang's case.
Mr. Liang, 62 years old, said in a Detroit courtroom on Friday
that he knew Volkswagen had not disclosed the "defeat devices" to
regulators. Those omissions enabled the company to obtain approval
to sell the cars in the U.S.
"That is why I am guilty," Mr. Liang told U.S. District Judge
Sean Cox. The defendant wore a gray suit and red tie. He declined
to comment later to reporters.
"This will certainly have an impact on proceedings in Europe,"
said Christopher Rother, a Berlin attorney representing European
plaintiffs suing Volkswagen in Germany.
According to the plea agreement, Mr. Liang and colleagues began
designing a new engine around 2006 but "soon realized...that the
engine could not meet both customer expectations as well as new,
stricter U.S. emissions standards." Instead, the plea said, they
designed software to recognize when the car was undergoing a test
and turn on emissions controls.
The Justice Department said the conspiracy began in November
2006, involved Jetta, Golf and other vehicles with model years
between 2009 and 2015, and continued until the cheating was
revealed in September 2015.
Mr. Liang moved to the U.S. from Germany in May 2008 to help
Volkswagen launch its "clean diesel" vehicles in the U.S. and now
lives in Newbury Park, Calif., the Justice Department said.
Investigators began looking at Mr. Liang early on, confiscating
his passport in November 2015, according to a person familiar with
the matter.
"He is one of many at Volkswagen who got caught up in this
emissions scandal, and he is very remorseful for what took place,"
Daniel Nixon, Mr. Liang's lawyer, said after the hearing.
The Justice Department last year publicly stepped up efforts to
charge individuals in corporate investigations, after facing
criticism that it heavily penalized firms for corporate wrongdoing
but prosecuted few executives for the same conduct.
Friday's plea deal suggests the Justice Department envisions a
different approach this time, with Mr. Liang helping prosecutors
pursue other individuals at Volkswagen.
"Defendant agrees to assist the government in the investigation
and prosecution of others," the agreement says, including
potentially testifying before a grand jury or at trial. The deal
also requires Mr. Liang to cooperate with German law
enforcement.
The document says that if the government determines that Mr.
Liang's cooperation "amounts to substantial assistance in the
investigation or prosecution of others," it will seek a reduced
sentence against him.
Volkswagen last year admitted to misleading environmental
regulators and consumers by installing illegal emissions-cheating
software on nearly 600,000 diesel-powered vehicles in the U.S.
Volkswagen has said the software is on some 11 million vehicles
world-wide.
Questions about Volkswagen emissions first arose in 2014, when
West Virginia University researchers identified discrepancies
between what the cars emitted on the road and in testing
situations.
Volkswagen didn't admit to the software at the time, and Mr.
Liang and his colleagues "pursued a strategy to disclose as little
as possible," prosecutors said in the indictment.
The Volkswagen employees misled regulators at the Environmental
Protection Agency and the California Air Resources Board about
testing results and tried to blame "innocent mechanical and
technological problems," according to the indictment.
In April 2015, one Volkswagen employee wrote an email in German
to Mr. Liang and other colleagues, saying in part "we 'only just
need a plausible explanation' as to why the emissions are still
high!!!" In another email the next month, an unidentified employee
wrote, "We need a story for this situation!"
The indictment said an employee in June wrote, "If the Gen 1
goes onto the roller at the CARB, then we'll have nothing more to
laugh about!!!!!" The Gen 1 was a new diesel engine for the U.S.
market, and CARB is the California Air Resources Board.
The indictment describes meetings dating to 2006 between Mr.
Liang, other unidentified Volkswagen employees and regulators,
during which the auto maker presented the new diesel engine without
mentioning it didn't meet emissions standards.
In June, the company agreed to a separate civil settlement
paying regulators and consumers up to $15 billion. In August, it
reached an additional $1.2 billion settlement to compensate
dealers. Those are separate from any criminal investigations.
Corrections & Amplifications: Mr. Liang is 62 years old and
remains an employee of Volkswagen. An earlier version of this
article incorrectly said he was 63, and the headline described him
as a former Volkswagen engineer.
--William Boston contributed to this article.
Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com and
Christina Rogers at christina.rogers@wsj.com
(END) Dow Jones Newswires
September 10, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.