Dieselgate Scandal Florida Arrest Adds to VW's Woes

Volkswagen desperately wants to leave the emissions-rigging scandal behind, but the arrest of a VW executive in Florida presents a new stumbling block in the seemingly endless saga.
VW is keen to put Dieselgate behind it.

It almost seems like a curse: Every time Volkswagen attempts to leave Dieselgate behind and look to the future by presenting new makes and models, the U.S. Justice Department puts a spoke in the carmaker's wheels.

Last year, the Justice Department filed a civil suit against VW shortly before the opening of the Detroit auto show. Now, just as VW's core-brand chief executive Herbert Diess was trying to win over Americans with a new SUV model, the FBI has arrested a Volkswagen executive in Florida on fraud and conspiracy charges relating to the emissions scandal. It involved the firm using so-called cheat software to artificially lower emissions of its diesel cars.

In June, Deputy U.S. Attorney General Sally Yates said the VW probe is looking at "multiple companies and multiple individuals." Shortly before, Volkswagen had agreed to pay $15 billion (€14 billion) to U.S. authorities and owners of some 500,000 vehicles.

But the criminal investigations are continuing and Ms. Yates, who will be stepping down next week, has made good on her threat. Oliver Schmidt, who appeared in court on Monday and will be testifying in a hearing on Thursday, led VW’s U.S. regulatory compliance office from 2014 to March 2015 in Auburn Hills, Michigan, before being called back to Germany.

Mr. Schmidt has long been regarded as a key figure in investigations.

During his tenure in the U.S. and thereafter, he is supposed to have repeatedly deceived U.S. authorities, according to the criminal complaint published on Monday and obtained by Handelsblatt. Mr. Schmidt is said to have been in handcuffs and wearing a prison uniform, Reuters reported.

He is thought to have been on vacation in Florida when he was then prevented from leaving. Mr. Schmidt is said to have known about the investigations against him, even meeting with FBI agents in London last year, according to Reuters. It remains unclear why he still traveled to the U.S.

Mr. Schmidt has long been regarded as a key figure in investigations, with his name appearing several times in the complaint filed against VW by New York Attorney General Eric Schneiderman in July.

According to Monday's court document, the FBI is cooperating with two crown witnesses that worked in engine development and have in return secured themselves immunity from prosecution in the U.S. VW manager James Liang has already pleaded guilty and is hoping for a lenient verdict as he cooperated with the authorities.

According to the criminal complaint, Mr. Liang was informed by Mr. Schmidt and others about the situation in the emissions scandal by July 27, 2015 and was already expecting charges in a worst-case scenario. The Dieselgate scandal was revealed in September 2015.

Meanwhile, sources close to the negotiations are claiming that the U.S. Justice Department and VW are nearing a multi-billion dollar agreement to resolve the government’s civil and criminal investigations. The deal would require the German automaker to pay a penalty of more than $3 billion, possibly $4 billion.

VW has been eager to put the Justice Department investigation behind it before President-elect Donald Trump is sworn in on January 20. But the investigations against individual managers will now continue after this point. Mr. Liang's verdict is set for early March. And the lawsuit against Mr. Schmidt, which could soon continue in the state of Michigan, has just begun.


Astrid Dörner is an editor for Handelsblatt. To contact the author: [email protected]