Volkswagen AG (ADR) (OTCMKTS:VLKAY) Scandal Could Cost Them Billions

Volkswagen AG (ADR) (OTCMKTS:VLKAY) is in a world of trouble. Investigators want to know who was behind the whole thing and who knew about it.

Those are just one of the many things federal investigators want to know. The emissions scandal has already cost the CEO his job, even though he says he didn’t know anything. Stock prices have plummeted and the car maker could face billions of dollars in fines.

Legal experts say Volkswagen will probably have to deal with legal problems, including criminal charges, coming from the admission that 11 million of its diesel vehicles sold around the world were equipped to cheat the emissions tests.

The Environmental Protection Agency says the German automaker installed software that enabled models such as the Jetta, Passat, Beetle and Golf to detect when they were being tested and emit less. The agency says these devices allowed the cars to go over 40 times the amount allowed.


The Justice Department is now working with Environmental Protection Agency investigators. David M. Uhlmann, a professor at the University of Michigan who was chief of the Justice Department’s Environmental Crimes Section, says if the investigators find enough evidence, the company and those involved could face criminal charges under the Clean Air Act. He added that criminal charges are almost certain.

VW LogoBut Uhlmann warned that it won’t be easy to bring the people involved to a U.S courtroom because everything happened overseas. The U.S does have an extradition treaty with Germany, but other countries are also investigating and could end up taking the company officials first.

Small Fine In 1973

It is not the first time Volkswagen has been accused of doing something like this. Back in 1973, the EPA found that the company had installed devices that turned off emission controls on some of its models. The company removed the devices and was fined $125,000. But the fine will be a lot more than that if the investigators find enough evidence in the next few weeks.

CEO Martin Winterkorn resigned four days ago, and the company announced it would set more than $7 billion aside to cover the scandal, but that number could fall short. Volkswagen apologized, but has not revealed who is behind the emission cheating. Senior board members said recently that the former CEO had nothing to do with it.

German media reported that the automaker had received warnings about the use of devices and tricks to get past the tests. The company was warned by one of its suppliers back in 2007, according to an internal investigation. A technician of the company also warned them about it four years ago.

Fines In The US

The Clean Air Act could bring fines of up to $37,500 per vehicle sold in the United States. 482,000 vehicles are said to be involved, which totals to more than $18 billion, $11 billion more than what the company has set aside.

Then there are the class-action lawsuits that could surface from the owners of these cars.

The EPA will now focus on finding any false statements or any evidence that shows the company hiding the use of the devices.


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