US prosecutors now target Volkswagen’s top management, upsetting Germany

Volkswagen logo. (© School Photo Project).

Last Monday, the US prosecutors held Volkswagen executive Oliver Schmidt, charging him with plotting to deceive the United States, over VW diesel emission scandal. He is to appear today in the U.S. District Court in Miami in a hearing before a U.S. Magistrate Judge. The VW employee was shown shackled and wearing a jail outfit. He was about to return to Germany after a short family vacation in Florida and was arrested before boarding an airplane to Europe. It’s the first time the US prosecutors are targeting VW’s employees. Until now, the company was negotiating with US environmental regulators, customers and dealers for the cost of compensation. Yesterday the US prosecutors announced criminal charges against another five VW executives thought to be in Germany.

It is more important, however, that Schmidt seems to have told the FBI investigators, that he and other WV employees had warned the company’s high ranking management that the ‘cheating device’ could cause ‘indictment’. It appears then that according to FBI, the top management of VW authorized the continuation of the use of the cheating device. If this is so, the company’s top management may be charged by the US department of Justice for the same felonies as Schmidt.

Targeting the top management

With this step, the American authorities may hold VW top management responsible for crime. This is a major turn in the diesel engines pollution scandal, because in this way the US can charge a large number of Germans and demand their extradition to the United States to stand for a criminal trial. The seriousness of the case is illustrated by fact that this new turn has stemmed from another judiciary case. James Liang, a VW employee, was accused last September of cheating about the ‘defeat device’. He pleaded guilty and apparently has cooperated with the FBI investigators in order to mitigate his own position. According to Reuters, his trial is delayed because the prosecutors “consider charging others”.

There is more evidence then that the FBI has an ‘ace’ up the sleeve. According to Reuters, the FBI complaint says that a ‘presentation’ by Schmidt and other employees took place on 27 July, that is, one month before the scandal broke out. “In the presentation, VW employees assured VW executive management that U.S. regulators were not aware of the defeat device. Rather than advocate for disclosure of the defeat device to U.S. regulators, VW executive management authorized its continued concealment.” Unquestionably then, the FBI aims at the top management of the company.

It’s not only money

Until now, the US authorities have pursued the company, not its employees. Up to now, WV has estimated that the cost of closing the case with the US environmental regulators, customers and dealers would reach $20 billion. Already, VW has included a round sum of $18bn in its books for litigation costs. On top of that, the scandal has wiped out the entire campaign to launch new diesel engine cars in the US. Nevertheless, the FBI charges against particular employees now open a new chapter in the case of US against VW.

Not to forget, that VW, the second largest car company of the world, with its twelve brand names (VW, Audi, Porsche, the Volkswagen trucks Scania and MAN, Skoda, Seat, etc) is the champion of the German car sector. In turn, the car sector is the roaring heart of the country’s economy and her highly successful export machine. The continuation of the persecution of the company and its employees may transform a highly costly business scandal into a political quarrel. For years now the US has been accusing Germany of not cooperating with the rest of the other major European economies, in effectively confronting the still crippling effects of the 2008-2010 financial meltdown.

Egotistic economic policy

In particular, the outgoing US secretary of the Treasury, Jack Lew has repeatedly accused his German counterpart Wolfgang Schäuble of following an egotistic economic policy mix. Lew has explained that the German fiscal austerity and the restrictive monetary theorizing are not supportive of the rest of the EU member states, and consequently are detrimental to the entire western economic volume. One of their meetings reportedly ended with Lew saying that he couldn’t communicate at all with the German minister. Even the President-elect Donald Trump has said that Germany has enough money to solve Europe’s financial problems. In this way, Trump holds Berlin responsible for not having yet done so.

In conclusion this new development, with the American authorities coming after the top management of VW, constitutes a direct assault to German interests in the US. No matter if, most of the VW’s top management and its CEO Martin Winterkorn at the time the environmental scandal broke, are now out. Their indictment will be equally damaging for Germany.