by Cedric Hughes, Barrister & Solicitor with regular weekly contributions from Leslie McGuffin, LL.B.   

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Safety First Profits Second

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In the automotive world, recently, corporate criminal liability is not necessarily shielding employees who may have participated in the wrongdoing.  Volkswagen [VW] recently pleaded guilty to conspiracy, obstruction of justice, and importing vehicles by using false statements incurring a US$4.3 billion fine—the biggest ever by the US government against an automaker.  Six Volkswagen employees, all German citizens were also charged on January 11 with conspiracy to defraud the US by making false statements to regulators and the public, and three of the six with fraud and clean-air violations.

VW’s plea bargain included cooperating in the continuing investigation which, commentators speculate could lead to the arrest of more employees.  Media reports say, “In announcing the charges and the plea bargain, … prosecutors detailed a large and elaborate scheme … to commit fraud and then cover it up, with at least 40 employees allegedly involved in destroying evidence.”  Five of the six employees who face charges were in Germany and not in custody; the sixth, Oliver Schmidt was taken into custody in early January while visiting Miami.

Reports cite Mr. Schmidt’s biography from a 2012 conference describing him as “responsible for ensuring that vehicles built for sale within the US and Canada comply with past, present and future air quality and fuel economy government standards in both countries.”  It further noted he served as VW’s direct factory and government agency contact for emissions regulations.

The criminal complaint, dated December 30, 2016 says Mr. Schmidt, in answering regulators in 2015 as to why diesels produced lower emissions during testing than while real-world driving “offered reasons for the discrepancy” rather than disclosing the enabling (allegedly illegal) software.  The others charged included two former chiefs of VW engine development, and the former head of quality management and product safety.  The complaint details when the alleged deceit began and alleged supervisory instructions to destroy hard drives with incriminating emails, and “not to get caught.”

Days later, Takata Corporation pleaded guilty to a criminal charge in connection with its admission to hiding for about 15 years the deadly risks of its exploding airbags.  The plea was included in a settlement agreement to pay US regulators, consumers, and car manufacturers US$1 billion in penalties.

Separately, three former Takata executives: Hideo Nakajima, Tsuneo Chikaraishi, and Shinichi Tanaka were also charged for their alleged roles in hiding the risks.  The three, Japanese citizens and not currently in US custody, worked at Takata until about 2015.  Prosecutors allege they “knew the inflators had ruptured and other failures during testing, and routinely discussed fabricating test results, removing unfavourable information—known as “XX-ing” the data—and manipulating reports.  They hid the defects and issued flawed reports so that carmakers would buy the airbags, enriching themselves and the company.”

US Attorney Barbara McQuade, speaking in Detroit on January 13 said, “Automotive suppliers who sell products that are supposed to protect consumers … must put safety ahead of profits. If they choose instead to engage in fraud, we will hold accountable the individuals and business entities …responsible. …The investigation hasn’t concluded and other people may be charged.”



Cedric Hughes

huges & company law corporation vancouver


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