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U.S. Snags, Charges VW Exec in Miami; Other Execs Told To Stay Away

In an ironic twist, though VW has settled most of the charges against it in Dieselgate a key executive was arrested and held in the diesel-rigging scandal.

In an ironic twist, Volkswagen warned its traveling executives Tuesday to steer clear of the U.S. following the arrest Oliver Schmidt, a high-level VW exec, who was returning home from a Florida vacation. The Department of Justice charged Schmidt with misleading regulators about the emissions-cheating devices installed on VWs. His second appearance in U.S. District Court in Miami, where has arrested, is scheduled Thursday.

The arrest of the VW exec caught the automaker flat-footed and wrong-footed. Many of those who traveled to Detroit to attend this week’s North American International Auto Show were surprised by the arrest. Indeed, lawyers for some top-level executives have told their clients to avoid travel in the U.S.

VW Settles Criminal Case

This comes against the backdrop of an announcement Wednesday where Volkswagen announced it had reached a $4.3 billion settlement with the Justice Department and other regulators, effectively ending the criminal case against the automaker for its Dieselgate scandal.

Schmidt’s arrest and the announcement of the settlement come against the backdrop of U.S. prosecutors preparing charges against other senior executives of the automaker, according to reports filed by Bloomberg financial news.

Automotive News put it all into context. “The arrest [of Schmidt] and looming charges against other senior executives show that the year-long investigation into the emissions cheating [scandal] is coming to a head in the final days of the Obama administration.” This is an outcome that Volkswagen has been seeking as it does not want to face the uncertainty of how the Trump administration might handle a foreign carmaker in its [Volkswagen’s] situation.

The 48-year-old Schmidt was the automaker’s liaison with U.S. environmental regulators. His first court appearance was Monday where he was held over for a second appearance on Thursday. U.S. District Court Judge William Turnoff ordered Schmidt held because the jurist considered the VW exec a flight risk. Schmidt’s attorney notified the court that his client would be willing to speak with investigators. The attorney did ask for Schmidt’s release.

Court papers lay out a potential roadmap for prosecutors to use against VW executives. The papers point out that VW senior officials were made aware of the “existence, purpose and characteristics” of the cheating device on diesel cars. The device lowered emissions when the cars were undergoing tests. Three cooperating insiders helped U.S. investigators find this information. The execs heard of the cheating device two months before the automaker admitted it had committed environmental fraud in September 2015.

Top Execs Assured

Top executives received assurances at this time that U.S. regulators “were not aware of the defeat device,” according to a filing in U.S. District Court, Detroit. “Rather than advocate for disclosure of the defeat device to U.S. regulators, VW management authorized its continued concealment.”

There is no information on whether senior-level execs may face charges. And there is no information on whether any other executives – besides Schmidt – are even still in the employ of the automaker. The Justice Department declined to comment.

A person familiar with the matter declined to specify if there will be more charges against other more senior-level executives. VW has said for some months that top management wasn’t aware of the plan to install emissions-rigging software. “The then and current board of management of Volkswagen AG had, … no knowledge of the use of unlawful engine-management software at that time,” according to VW’s annual report for 2015, quoted in Automotive News.

The statement was made to answer following inquiries by the Justice Department. The automaker continues to state that it is cooperating “with the Department of Justice as we work to resolve remaining matters in the United States. It wold is not appropriate to comment on any ongoing investigations or to discuss personnel matters,” said a VW statement.

Ex-CEO Forced Out

So far, though, the automaker has suspended or removed roughly a dozen middle- and senior-level managers in the wake of the discovery of the scandal, including Martin Winterkorn, former chief exec of VW. Winterkorn has denied knowledge of the cheating.