Will the Obama Administration Hold VW Accountable for Corporate Crime?

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Will the Obama Administration Hold VW Accountable for Corporate Crime?

"This is a huge test of how serious the administration’s commitment is to prosecuting white collar crime."

The EPA says VW deliberately evaded federal emissions requirements in nearly a half-million diesel cars in the U.S. since 2009 by manufacturing and installing "defeat devices" in order to "bypass, defeat, or render inoperative elements of the vehicles' emission control system that exist to comply with [Clean Air Act] emission standards." (Photo: yuankuei/flickr/cc)

The allegations being leveled against auto manufacturer Volkswagen (VW)—that it cheated to make nearly half a million diesel cars appear cleaner-burning than they are—offer a chance for the Obama administration to make good on its recent pledge to step up its fight against corporate crime, observers said this weekend. 

As Daniel Marans wrote for the Huffington Post: "The case provides an opportunity for the Department of Justice to deliver on a promise it made in a Sept. 9 memo to refocus its prosecution of white-collar crime on individual employees, rather than the institutions that employ them, and to pressure companies to cooperate in those efforts."

After all, Marans and others reported, the Environmental Protection Agency's accusation (pdf) is that VW deliberately evaded federal emissions requirements in nearly a half-million diesel cars in the U.S. since 2009 by manufacturing and installing "defeat devices" in order to "bypass, defeat, or render inoperative elements of the vehicles' emission control system that exist to comply with [Clean Air Act] emission standards."

On Sunday, a spokesman for the company told Reuters: "We have admitted to it to the regulator. It is true. We are actively cooperating with the regulator."

"I personally am deeply sorry that we have broken the trust of our customers and the public," VW CEO Martin Winterkorn added.

During normal driving situations, the controls are turned off, allowing the cars to spew as much as 40 times as much pollution as allowed under the Clean Air Act, the EPA said. Such pollutants are linked to a range of health problems, including asthma attacks, other respiratory diseases, and premature death.

"I don’t suppose we’ll never know how many people died—asthmatics, for examplebecause Volkswagen designed its 'clean diesel' vehicles—all 482,000 of them sold in the U.S. since 2009—to burn dirty except when they were being tested," wrote UCLA public policy professor Mark Kleiman at The Reality-Based Community blog on Friday.

"When people conspire to commit a crime that harms the health of untold numbers of people,  criminal charges are appropriate," he wrote. "And not only against the company, but against every official in it who can be shown to have known about the conspiracy."

According to news reports, the EPA and California's Air Resources Board said VW violated federal law and could face fines of up to $18 billion—$37,500 per vehicle—as well as criminal prosecution. Both agencies issued notices of non-compliance to VW Friday, a step necessary before ordering a recall.

"They appear to have designed a system with the intention to mislead consumers and the government," Tyler Slocum, director of the energy program at consumer advocacy group Public Citizen, told the New York Times. "If that’s proven true, it’s remarkable and outrageous. It would merit a heck of a lot more than just a recall and a fine. We would see criminal prosecution."

Just a few days ago, corporate watchdog groups slammed a $900 million settlement between the Justice Department and "homicidal fugitive from justice" General Motors as "unconscionable" and "shamefully weak."

Which leaves critics wondering: Will the VW revelations force the DOJ to bare its teeth? A recent analysis of DOJ statistics showed a "long-term collapse" of federal white collar crime prosecutions, which are down to their lowest level in 20 years. But the DOJ's September memo suggested that the agency would soon begin re-emphasizing prosecution of individual employees and put pressure on corporations to turn over evidence against their executives.

"This is a huge test of how serious the administration’s commitment is to prosecuting white collar crime," Slocum added to HuffPo on Saturday. "If the facts end up showing that Volkswagen executives deliberately designed and implemented a program to evade emissions testing, that is a brazen act and there has to be some accountability. It cannot just be yet another instance of Volkswagen opens up its checkbook and writes a check of shareholders' money to pay a fine. There has to be prosecution of executives involved in such a scheme."

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