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U.S. Sues Volkswagen Over Diesels Designed to Cheat Emissions Tests

WASHINGTON -- The Justice Department sued Volkswagen on Monday over emissions-cheating software found in nearly 600,000 diesel vehicles sold in the United States.

The civil complaint against the German automaker, filed on behalf of the Environmental Protection Agency in U.S. District Court in Detroit, alleges the company illegally installed software designed to make its diesel engines pass federal emissions standards while undergoing laboratory testing. The vehicles then switched off those measures to boost performance in real-world driving conditions, resulting in greenhouse gas emissions up to 40 times greater than federal environmental standards.

The allegations against Volkswagen, along with its Audi and Porsche units, carry penalties that could cost the automaker billions of dollars, a senior Justice Department official said.

VW could face fines in theory exceeding $90 billion - or as much as $37,500 per vehicle per violation of the law, based on the complaint. In September, government regulators initially said VW could face fines in excess of $18 billion.

"Car manufacturers that fail to properly certify their cars and that defeat emission control systems breach the public trust, endanger public health and disadvantage competitors," said John C. Cruden, the assistant attorney general for the Justice Department's Environment and Natural Resources Division.

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"The United States will pursue all appropriate remedies against Volkswagen to redress the violations of our nation's clean air laws alleged in the complaint," he said.

The lawsuit is being filed in the Eastern District of Michigan and then transferred to Northern California, where class-action lawsuits against Volkswagen are pending.

"We're alleging that they knew what they were doing, they intentionally violated the law and that the consequences were significant to health," the senior Justice Department official said.

The Justice Department has also been investigating criminal fraud allegations against Volkswagen for misleading U.S. consumers and regulators. Criminal charges would require a higher burden of proof than the civil lawsuit.

The company first admitted in September that the cheating software was included in its diesel cars and SUVs sold since the 2009 model year.

In a statement Monday, Volkswagen said "it will continue to work cooperatively with the EPA on developing remedies to bring the TDI vehicles into full compliance with regulations as soon as possible. In addition, we are working with Kenneth Feinberg to develop an independent, fair and swift process for resolving private consumer claims relating to these issues. We will continue to cooperate with all government agencies investigating these matters."

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U.S.-listed shares of Volkswagen were down 3.3 percent at $29.95 in afternoon trading.

The company is negotiating a massive mandatory recall with U.S. regulators.

"So far, recall discussions with the company have not produced an acceptable way forward," aid Assistant Administrator Cynthia Giles for EPA's Office of Enforcement and Compliance Assurance. "These discussions will continue in parallel with the federal court action."

Reuters contributed to this report.