Friday, September 9, 2016

VW engineer pleads guilty to diesel emissions scandal – The Detroit News

Detroit — A veteran Volkswagen AG engineer indicted by a grand jury pleaded guilty Friday to a criminal charge for his involvement in the German automaker's diesel emissions scandal.

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

James Robert Liang, leader of diesel competence for VW from 2008 until June, appeared in U.S. District Court on Friday to enter his guilty plea to conspiracy to defraud the U.S. government to commit wire fraud, and to violate the Clean Air Act. That penalty includes five years in prison and a $ 250,000 fine.

According to federal officials, Liang, 62, of Newbury Park, California, admitted he was involved in making and implementing a defeat device so that the automaker's diesel engines could appear to pass U.S. emissions tests. When the cars were being tested by the government, the emissions control system worked properly; but when driven on the road, software disabled that system.

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. Regulators have said that in normal driving the vehicles emitted up to 40 times more smog-causing nitrogen oxide than the legal limit. VW previously agreed to settlements that could total $ 16.5 billion to get the cars off U.S. roadways.

Liang said he and co-workers knew the company's marketing claims – that the cars were environmentally friendly "clean diesels" – were false. As part of his plea, Liang also 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," Liang 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 U.S. Justice Department, he did not enter a plea to that charge.

Liang's actual role in the scandal was described in court records. The records show:

Liang and his co-conspirators "pursued and planned the use of a software function" to cheat standard U.S. emissions tests.

■He used the device while working on the clean-diesel program and "assisted" in making the device work.

Liang worked with his co-conspirators to calibrate and refine the device in 2008.

■He and others caused defeat device software to be installed in all of the roughly 500,000 VW diesel vehicles equipped with diesel 2.0-liter engines sold in the U.S. from 2009 through 2015.

The matter was before U.S. District Judge Sean Cox Friday in Detroit's federal courthouse.

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

It was not immediately known if other VW employees will be charged or indicted in the case.

A spokeswoman for the automaker said Friday, "Volkswagen is continuing to cooperate with the U.S. Department of Justice. We cannot comment on this indictment."

The plea agreement calls for a sentence or more than five years in prison. But under the terms of the agreement, if Liang "provides substantial assistance" to the government in its continuing investigation of VW, the government could ask the judge to give him a lighter sentence.

Assistant U.S. Attorney Mark Chutkow — 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.

In court Friday, Chutkow said Liang knew two or more of his colleagues engaged in the same criminal acts, and that Liang emailed coworkers in the United States and Germany from 2012 to 2015 to further the conspiracy.

Liang and others, according to the plea agreement, used a software update in 2014 and a recall last year to update and help cover up the defeat device.

A 2014 update to "improve the vehicles" for consumers that was used in part to "enhance the defeat device" was a result of higher rates of warranty claims as the vehicles began to age, according to the plea deal. Engineers believed that the increased claims were a result of the vehicles operating in testing mode with the defeat device for too long.

Once federal regulators brought up irregularities in testing of some of the vehicles' emissions that was done by a third party, Laing and others in spring 2014 discussed how they could address questions from CARB, in accordance with the EPA, 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, when, in fact, Laing and his co-conspirators knew that the update would lower emissions but not remove the defeat device software.

Liang is not a U.S. citizen and his conviction on the charges could affect his eligibility to remain in the United States, 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.

Liang is mentioned in a July State of New York lawsuit as an engineer for VW in Wolfsburg, Germany. The lawsuit alleges he was directly involved in the development of a defeat device for the Jetta in 2006 and by 2014-15 was conducting tests for it at the automaker's California facility.

Last year, the Justice Department 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 ignition switch defects, nor were executives from Toyota Motor Corp. over the unintended acceleration issue.

In October, The Detroit News reported that the U.S. Attorney's Office in Detroit was helping lead an investigation into Volkswagen of America's admission it cheated to evade emissions requirements in more than 500,000 cars built since 2008.

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 into the cheating scandal. The Environmental Protection Agency's testing labs are in Ann Arbor and Volkswagen has offices in Auburn Hills.

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 Volkswagen vehicles met emissions requirements.

Staff writer Keith Laing contributed.

mwayland@detroitnews.com

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