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Senior VW Official Arrested in Diesel Emissions Cheating Scandal

Oliver Schmidt headed environmental office in U.S.

by on Jan.10, 2017

VW executive Oliver Schmidt was arrested in Florida in connection to the company's diesel emission scandal.

A 48-year-old executive for Volkswagen who had run the automaker’s engineering and environmental office in the U.S. has been arrested in connection with VW’s ongoing diesel emissions scandal.

Oliver Schmidt was taken into custody in Florida last weekend, prosecutors there seeking to keep him jailed after arguing that the German resident was a flight risk. Schmidt is the second VW executive arrested in connection with the scandal, in which the carmaker used a so-called “defeat device” to fool government emissions tests while actually producing significantly more pollution than permitted with its two turbodiesel engines.

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Schmidt was cited in a Dec. 30 complaint, according to the Associated Press, for conspiring with other VW officials to develop the software used on about 11 million vehicles sold worldwide. That includes 475,000 cars and trucks sold in the U.S. with a rigged 2.0-liter diesel, and another 80,000 equipped with a more upscale 3.0-liter turbodiesel.

The deception was first uncovered in 2014 by the Council on Clean Transportation, a non-profit group, and ultimately led the U.S. Environmental Protection Agency to reveal the scam in September 2015. That has triggered a series of actions that so far has forced Volkswagen to pay out more than $20 billion in fines and settlements.

(VW gets go-ahead to repair 60,000 late-model diesels. Click Here for the story.)

When the nonprofit Council first advised VW that it had found problems with VW’s diesel engine control software, Schmidt reportedly wrote to a colleague saying that, “It should first be decided whether we are honest. If we are not honest, everything stays as it is.”

Schmidt later advised a VW official an analysis of what sort of penalties VW might face.

The AP noted that a bio provided by Schmidt for a 2012 auto industry conference noted that he was responsible for ensuring vehicles sold in the U.S. and Canada met “past, present and future air quality and fuel economy government standards in both countries.”

Volkswagen executives have insisted that the engine rigging was limited to a “handful” of insiders who were trying to find a way to meet the demand for a diesel engine that was not only clean but quick and fuel efficient. Prosecutors in both the U.S. and Europe continue to probe to see if the deception actually reached higher up in the company, however.

(VW reaches diesel deal, but judge warns owners not to strip cars before buyback. Click Here for the story.)

In Germany, several current and former executives, including one-time CEO Martin Winterkorn, remain under investigation, though prosecutors there are also focusing on whether VW management intentionally misled investors in order to maintain the company’s stock price – which ultimately tumbled sharply when the subterfuge was revealed.

In September, 62-year-old James Robert Liang, a former engineer at a VW facility in Michigan, pleaded guilty as part of the ongoing U.S. investigation, agreeing to assist prosecutors in their probe.

In a Miami courtroom on Monday, Schmidt’s attorneys tried to arrange bond and insisted he was cooperating with the FBI investigation. But prosecutors argued that he had actually been evasive and posed a flight risk.

(VW strikes deal on bigger diesel engines. For more, Click Here.)

For its part, VW said this week it continues to cooperate with investigators. The company recently reached a settlement with the EPA and other agencies covering the 3.0-liter diesel, a deal worth an estimated $2 billion. Last June, it settled with the government over the 2.0-liter engine, that agreement worth $14.7 billion. It has also worked out a settlement with U.S. dealers but continues to negotiate with shareholders.

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