Volkswagen Scandal Reaches All the Way to the Top, Lawsuits Say

By JACK EWING and HIROKO TABUCHI | JULY 19, 2016

Three attorneys general on Tuesday directly challenged Volkswagen’s defense over its emissions deception, calling the decision to thwart pollution tests an orchestrated fraud that lasted more than a decade, involved dozens of engineers and managers and reached deep into the company’s boardroom.

The accusations, leveled in lawsuits by New York, Massachusetts and Maryland, contradict Volkswagen’s portrayal of the deception, representing a new threat to the carmaker’s finances, reputation and management. For the first time, the suits connected Volkswagen’s chief executive, Matthias Müller, to the scandal, saying he was aware of a 2006 decision to not outfit Audi vehicles with equipment needed to meet American clean-air standards.

Volkswagen, which admitted late last year to equipping 11 million vehicles worldwide with software to cheat emissions tests, has maintained that the deception was limited to a small group of people. The company has said top management was not aware of the cheating software, known as a defeat device.

But the New York civil complaint, drawing on internal Volkswagen documents, emails and witness statements, depicts a corporate culture that allowed a “willful and systematic scheme of cheating.” The evidence paints the most detailed picture yet about how the deception unfolded and who was responsible.

The suits identified six different defeat devices, saying the deception was an “iterative process” that started with an Audi model. They described the device as a cost-saving measure, because meeting American emissions standards would have required an overhaul of the vehicles. The suits stopped short of accusing Mr. Müller of having specific knowledge of the devices.

At the time of the 2006 decision, Mr. Müller was head of project management at Audi, Volkswagen’s luxury car division. He became chief executive of Volkswagen in September, replacing Martin Winterkorn, who resigned days after the Environmental Protection Agency accused the company of the diesel deception that month.

“The idea that this level of fraud could take place and involve so many people at such high levels of a major international corporation is appalling,” Eric T. Schneiderman, the New York attorney general, said at a news conference in New York, describing what he called “a cunningly cynical fraud at the heart of this scandal.”

He was joined by the attorney general for Massachusetts, Maura Healey. The suits claim that the company made false statements to regulators and broke laws requiring cars to have approved pollution control systems

Mr. Müller and Mr. Winterkorn have previously denied any involvement in the wrongdoing. “There is no credible evidence to support the allegation regarding Matthias Müller,” a Volkswagen spokeswoman, Jeannine Ginivan, said in an emailed statement. “It does not bear scrutiny.”

The potential blowback for Volkswagen could be costly.

The company last month agreed to pay nearly $15 billion, a record, to settle claims in the United States by Volkswagen owners and regulators. But the settlement did not resolve what penalties might be imposed on Volkswagen, leaving room for additional suits.

READ MORE ON NYTIMES.COM

By JACK EWING and HIROKO TABUCHI | JULY 19, 2016

Three attorneys general on Tuesday directly challenged Volkswagen’s defense over its emissions deception, calling the decision to thwart pollution tests an orchestrated fraud that lasted more than a decade, involved dozens of engineers and managers and reached deep into the company’s boardroom.

The accusations, leveled in lawsuits by New York, Massachusetts and Maryland, contradict Volkswagen’s portrayal of the deception, representing a new threat to the carmaker’s finances, reputation and management. For the first time, the suits connected Volkswagen’s chief executive, Matthias Müller, to the scandal, saying he was aware of a 2006 decision to not outfit Audi vehicles with equipment needed to meet American clean-air standards.

Volkswagen, which admitted late last year to equipping 11 million vehicles worldwide with software to cheat emissions tests, has maintained that the deception was limited to a small group of people. The company has said top management was not aware of the cheating software, known as a defeat device.

But the New York civil complaint, drawing on internal Volkswagen documents, emails and witness statements, depicts a corporate culture that allowed a “willful and systematic scheme of cheating.” The evidence paints the most detailed picture yet about how the deception unfolded and who was responsible.

The suits identified six different defeat devices, saying the deception was an “iterative process” that started with an Audi model. They described the device as a cost-saving measure, because meeting American emissions standards would have required an overhaul of the vehicles. The suits stopped short of accusing Mr. Müller of having specific knowledge of the devices.

At the time of the 2006 decision, Mr. Müller was head of project management at Audi, Volkswagen’s luxury car division. He became chief executive of Volkswagen in September, replacing Martin Winterkorn, who resigned days after the Environmental Protection Agency accused the company of the diesel deception that month.

“The idea that this level of fraud could take place and involve so many people at such high levels of a major international corporation is appalling,” Eric T. Schneiderman, the New York attorney general, said at a news conference in New York, describing what he called “a cunningly cynical fraud at the heart of this scandal.”

He was joined by the attorney general for Massachusetts, Maura Healey. The suits claim that the company made false statements to regulators and broke laws requiring cars to have approved pollution control systems

Mr. Müller and Mr. Winterkorn have previously denied any involvement in the wrongdoing. “There is no credible evidence to support the allegation regarding Matthias Müller,” a Volkswagen spokeswoman, Jeannine Ginivan, said in an emailed statement. “It does not bear scrutiny.”

The potential blowback for Volkswagen could be costly.

The company last month agreed to pay nearly $15 billion, a record, to settle claims in the United States by Volkswagen owners and regulators. But the settlement did not resolve what penalties might be imposed on Volkswagen, leaving room for additional suits.

READ MORE ON NYTIMES.COM