(Bloomberg) -- Volkswagen AG’s diesel cheating went on for far longer than the company has acknowledged, state officials in the U.S. alleged as they sought to add billions of dollars to the carmaker’s tab for the scandal.
After the first known instance of the company rigging diesel engines with software to cheat emissions tests in 1999, VW spent much of the next decade perfecting its so-called defeat devices for use in Europe and then the U.S., the attorneys general for New York, Maryland and Massachusetts said.
Former VW Chief Executive Officer Martin Winterkorn and other top company executives developed six generations of defeat devices to beat pollution-control tests starting in Europe in 2004, the attorneys general said Tuesday in lawsuits and press conferences. In 2006, Winterkorn’s successor, Matthias Muller, became aware of the defeat device, according to the New York complaint.
By 2008, Volkswagen’s defeat devices reached the U.S. where “top brass” planned to confuse authorities and hide the truth, they said.
VW’s $15.3 billion in lawsuit settlements with federal regulators, car owners and 44 states covers only 2009 models and later. The company, which is also the target of potentially costly criminal probes in the U.S., Germany and South Korea, admitted in September to using the defeat devices, allowing almost 600,000 vehicles to have the run of the road while emitting up to 40 times more pollutants than permitted under U.S. law. In Europe, it isn’t clear how many cars equipped with defeat devices before 2009 remain on the highway.
VW responded to the new state lawsuits, saying it’s cooperating with the U.S. Justice Department of Justice, the Environmental Protection Agency and the California Air Resources Board on a “national resolution” of all remaining environmental issues.
"It is regrettable that some states have decided to sue for environmental claims now, notwithstanding their prior support of this ongoing federal-state collaborative process," Jeannine Ginivan, a spokeswoman for the carmaker, said in a statement. She declined to comment on allegations dating back to 1999.
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The new allegations that cheating extended over a longer period “reveal a culture of deeply rooted corporate arrogance, combined with a conscious disregard for the rule of law or the protection of public health and the environment,” said New York Attorney General Eric Schneiderman. “Substantial penalties must be imposed on the Volkswagen companies, above and beyond the amount they have to pay to make American consumers whole.”
VW’s Audi and Porsche units, as well as their U.S. divisions, are named as defendants in the lawsuits. Maryland Attorney General Brian Frosh said penalties against the company might run into the hundreds of billions of dollars.
Michael Weinstein, a former Justice Department attorney who’s now a white-collar defense lawyer at Cole Schotz PC, said it’s likely federal prosecutors are reading the states’ complaints very closely.
“From the allegations, this appears to be a large scale, deeply embedded wholesale fraud brought by the company against the public and the government,” Weinstein said. “Schneiderman’s complaint includes many high ranking executives as well as senior management that -- if he can tie them in directly through e-mails or testimony -- creates tremendous problems for them and the company as a whole.”
VW’s efforts to evade emissions laws dates back to 1999, when the Audi division tried to lower nitrogen oxide emissions to be able to sell large luxury cars with 3-liter, six-cylinder engines in Europe. Audi engineers found they could eliminate the “traditional, disagreeable clattering noise” diesels made when they started by injecting additional fuel into the engine. A side effect of that fix was that the vehicles violated European emissions standards. Part II of the fix was software that detected when testing was being conducted -- based on the lack of steering wheel movement -- and deactivated the fuel injection.
The combination of the fuel injection and defeat-device software was used on Audi V6 diesels from 2004 to 2008 in Europe, the attorneys general said. The company called it “Acoustic Function” because it reduced the clattering noise.
VW engineers decided to adopt the Audi technology to meet tough U.S. emissions standards in 2006, according to the state lawsuits.
The engineers couldn’t figure out how to make the company’s lean-NOx traps work for reducing nitrogen oxides without producing so much soot that they clogged an emissions-control filter after 50,000 miles -- far sooner than the 150,000-mile standard mandated in the U.S. Under a management-imposed deadline and “with the knowledge and approval of their managers,” the engineers adapted the Audi software, the attorneys general said.
There were six variations of the defeat device installed by VW and Audi starting in 2008, with Porsche implementing them later, according to Schneiderman’s office. VW used the devices even after the EPA began looking into the software to determine its purpose, according to the complaint.
When regulators started asking questions, several VW employees destroyed incriminating evidence after they were tipped off by a senior in-house lawyer in Germany and then repeatedly failed to disclose to regulators the true reason for the discrepancies, according to the New York and Maryland complaints.
In one 2014 e-mail obtained by New York investigators, Winterkorn was told by Frank Tuch, director of VW group quality management, "A thorough explanation for [high] emissions cannot be given to authorities.”
--With assistance from Bradley Saacks David Welch and Christoph Rauwald To contact the reporters on this story: Kartikay Mehrotra in San Francisco at firstname.lastname@example.org, Erik Larson in New York at email@example.com, Jeff Plungis in Washington at firstname.lastname@example.org. To contact the editors responsible for this story: Michael Hytha at email@example.com, David Glovin at firstname.lastname@example.org, Jon Morgan at email@example.com, Peter Blumberg
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