The investigation into diesel emissions test cheating by Volkswagen has taken a significant turn with the guilty plea entered by a VW engineer in U.S. District Court in Detroit.
James Robert Liang, 62, a former member of the VW Diesel Development Department, pleaded guilty to a single count of conspiracy to defraud the government through wire fraud. VW itself has acknowledged that it rigged the engines in nearly 500,000 diesel vehicles to illegally pass emissions tests. But the question remains who orchestrated the subterfuge and how far up the corporate ladder the scam reached.
Liang reportedly helped design computer software that could detect when a vehicle was undergoing emissions tests and then lower production of pollutants like smog-causing oxides of nitrogen. He is now expected to help the government target other VW employees involved in the scam.
"Mr. Liang came to Detroit today to accept responsibility for his actions," one of his attorneys said outside the court after the guilty plea was accepted. "He is one of many people at Volkswagen who got caught up in this emissions scandal and he's very remorseful for what occurred."
For its part, VW issued a terse response to the news, saying that it is "continuing to cooperate with the U.S. Department of Justice. We cannot comment on this indictment."
Liang, who is a German national but also lives in Newberry Park, California, could play a significant role in resolving investigations, both in the U.S. and abroad. German prosecutors have taken their probe all the way up to former Volkswagen CEO Martin Winterkorn, who is suspected of having hidden his knowledge of the emissions scandal rather than advising company shareholders of the potential impact on VW's stock price.
The scandal broke last September when the U.S. Environmental Protection Agency publicly accused VW of rigging its diesel engines. The maker had long boasted that its 2.0-liter turbodiesel could achieve the seemingly impossible: boosting mileage and performance while reducing emissions. Shortly after the EPA announcement, VW acknowledged the subterfuge. It subsequently also admitted rigging a higher-end 3.0-liter diesel, as well.
In June, the automaker agreed to settle a civil probe covering just the smaller engine, paying a $14.7 billion penalty as part of a deal involving the U.S. Justice Dept., the EPA, the Federal Trade Commission and the California Air Resources Board, or CARB. Of that, $2 billion will be used to promote the sale of zero-emissions vehicles, while $2.7 billion will go to remediation efforts meant to offset the added pollution caused by the VW engines.
But the bulk of the payment, just over $10 billion, will be used to buy back and scrap about 475,000 VW diesel vehicles or repair them. The automaker continues to work with U.S. and California authorities on a possible fix for both of the tainted diesel engines. While repairs have begun on another 10.5 million vehicles VW sold overseas, no effective fix has yet been found for meeting the tougher U.S. emissions standards.
"We're holding Volkswagen responsible for distorting the market for clean cars," said EPA Gina McCarthy, the head of the EPA, at a June 28 news conference. McCarthy called the settlement "unprecedented," and a "groundbreaking achievement."
A settlement covering the 3.0-liter engine has yet to be completed. It is expected to be significantly smaller than the earlier deal. But VW faces significant additional costs. There are numerous lawsuits outstanding, brought by diesel owners, VW dealers, and by shareholders who have seen the value of their investments tumble since last year.
Late last month, VW reached a tentative settlement with 650 dealers worth about $1.2 billion.
The company is also facing potential civil and criminal penalties in Germany and several other countries. Some of the maker's top executives could yet be caught up in the scandal. Current Volkswagen brand boss Herbert Diess is believed to be under investigation, along with Winterkorn, for allegedly concealing the budding scandal from shareholders.