VW’s crisis continues with executive’s arrest

The company’s general manager of its Engineering and Environmental office was charged with fraud and violating the Clean Air Act. More staffers might come under fire.

The fallout continues for Volkswagen, but now it’s striking a personal note.

Oliver Schmidt, who led VW’s United States environmental regulatory compliance office from 2012 to 2015, was recently arrested while traveling in the U.S., charged with fraud and violating the Clean Air Act.

The New York Times reported:

The case against Mr. Schmidt sheds new doubt on Volkswagen’s assertions that top executives did not understand the full scale of the wrongdoing until early in September 2015, more than a year after questions were first raised about emissions from its vehicles. Mr. Schmidt briefed executives in detail months earlier, in July, according to the criminal complaint, filed in federal court in Michigan. The timeline of the briefing has not been laid out before by prosecutors.

The New York Times explained:

Mr. Schmidt was among the first to react in early 2014 when a study by West Virginia University found evidence that Volkswagen diesel cars polluted far more under normal driving conditions than they did in official testing labs.

In an email to a colleague in April 2014, he wrote, “It should first be decided whether we are honest,” according to an affidavit signed by Ian Dinsmore, an F.B.I. special agent. The affidavit was the basis for a criminal complaint against Mr. Schmidt.

Additional employee arrests might be on the horizon, despite a deal that VW is working to complete with the U.S. Justice Department.

The deal reportedly would require the company to pay more than $2 billion and plead guilty to charges, but it would not spare individual staff members from future criminal charges.

The recent arrest also doesn’t help the struggling automaker’s sullied reputation and its attempts to regain consumers’ trust.

The New York Times reported:

The complaint also says that other employees were involved in a cover-up, suggesting that more charges could be coming. It is unclear which employees—above or below Mr. Schmidt—the government believes were involved. Mr. Schmidt reported to high-ranking officials at Volkswagen headquarters in Wolfsburg.

Schmidt’s arrest follows the resignation of VW’s former chief executive, Martin Winterkorn, who stepped down in September 2015 after the emissions scandal made headlines. Both Winterkorn and Hans Dieter Pötsch, who was VW’s chief financial officer when the crisis broke, are under investigation by German authorities.

In November, following news of the investigation into Winterkorn and Pötsch, VW released the following statement:

Based on careful examination by internal and external legal experts, the Company reaffirms its belief that the Volkswagen Board of Management duly fulfilled its disclosure obligation under German capital markets law. The proceedings refer to the period during which Hans Dieter Pötsch served as the Group Chief Financial Officer. The Company and Hans Dieter Pötsch will continue to give the inquiries by the public prosecutor’s office their full support.

The company is continuing to play things close to the vest after Schmidt’s arrest, giving only the following terse statement:

[The company] continues to cooperate with the Department of Justice as we work to resolve remaining matters in the United States. It would not be appropriate to comment on any ongoing investigations or to discuss personnel matters.

The crisis has already cost VW roughly $16 billion in civil suits, just in the United States.

“About 40 [percent] of the company’s market value was wiped out when the scandal broke,” CNN Money reported.

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