Yesterday, corporate “person” Volkswagen entered a guilty plea to several criminal charges, including violations of the Clean Air Act and customs regulations as well as obstruction of justice. More significantly, six of the natural human executives have been taken into custody and are also facing felony charges.
This marks a radical change for an Administration that has been drawing criticism for being “soft” on corporate crime. Most of the time, corporate people simply buy their way out of trouble by making deferred prosecution deals and paying a relatively small fine – and they virtually never have to admit to wrongdoing. Getting a corporate felon such as VW to actually own up to its crime is a remarkable achievement.
Furthermore, the fines and penalties that the company is facing amount to $4.3 billion – and that’s on top of approximately $16 billion the German automaker will be paying out in compensation, repair costs, and civil claims from customers – bringing the grand total to $20 billion.
To put that figure in perspective, the Volkswagen Group’s total revenues for 2015 were just over €213 billion (approximately $227 billion USD). That’s nearly 10% of that year’s total income – and represents one of the most expensive penalties ever paid by a corporate wrongdoer.
In addition to monetary fines and penalties, VW will be on probation for thirty-six months, will be under supervision of an independent agency, and is required to cooperate with all investigations of employees, past and present.
Of course, a corporate person cannot live and commit crimes without the natural people who make it actually run and operate. In addition to VW regulatory compliance officer Oliver Schmidt, who was arrested over the weekend, those taken into custody include marketing chief Heinz-Jakob Neusser, engine development supervisors Jens Hadler and Richard Dorenkamp, quality control manager Bernd Gottweis, and Jürgen Peter, who was responsible for communications between the corporate offices and various government regulators.
While these arrests represent an assertive step on the part of the Department of Justice, what will actually happen to these executives is not clear. There are questions about whether or not they will be tried in the U.S., because Germany does not usually extradite its own citizens. Nonetheless, facing charges in the U.S. could hamper their ability to travel outside their own country. The entire case could cause some diplomatic issues between Berlin and Washington D.C. as the Trump Administration takes over – and where Trump stands on this issue no one knows.
Nonetheless, U.S. Attorney General Loretta Lynch says that the DoJ has “always worked very well with our German colleagues.”
Volkswagen CEO Matthias Müller says that his company “deeply regrets the behavior that gave rise to the diesel crisis,” adding that the company has “worked tirelessly to make things right for our affected customers.”
That is in stark contrast to a statement he made to National Public Radio when the scandal first broke: “It was a technical problem…we had not the right interpretation of the American law.” At that time, Müller insisted that “we didn’t lie…we didn’t understand the question first.”
Nothing like getting caught with your pants down, eh Herr Müller?