FBI arrests top Volkswagen executive in emissions scandal

A top Volkswagen executive has been arrested on conspiracy suspicion stemming from the German automotive giant's emissions scandal, according to a criminal complaint unsealed Monday.

The weekend arrest of Oliver Schmidt, who directed VW's regulatory compliance in the U.S. from 2012-2015, moves the continuing investigation into the company's executive ranks, the latest development in the suspected corporate wrongdoing that has cost the automaker billions of dollars and stained its business reputation.

By virtue of his position, Schmidt knew that VW "intentionally installed" electronic software that enabled its diesel engines to defeat U.S. auto emissions tests, according to the Dec. 30 affidavit by FBI Special Agent Ian Dinsmore filed in Detroit federal court.

He nonetheless agreed to travel to the U.S. in 2015 for meetings in which he "intended to, and did, deceive and mislead U.S. regulators" about the corporate cheating, said the affidavit, which was used to establish probable legal cause to authorize the Schmidt's arrest.

He was arrested Saturday in Florida, according to a report by The New York Times, and is expected to be arraigned later Monday in Detroit federal court.

Investigators believe they have evidence to establish that Schmidt and other VW employees "conspired and unlawfully agreed" to defraud the U.S. by impeding auto-emissions enforcement, committing wire fraud and violating the Clean Air Act, the affidavit said.

VW previously admitted to rigging its diesel autos to beat emissions tests and is paying about $11 billion to buy back those cars and compensate owners.

In a statement issued as the North American International Auto Show opened in Detroit Monday, the company said: "Volkswagen continues to cooperate with the Department of Justice as we work to resolve remaining matters in the United States. It would not be appropriate to comment on any ongoing investigations or to discuss personnel matters."

James Liang, a former Volkswagen engineer who worked for the company in California, pleaded guilty in September to charges that included conspiracy to defraud the federal government and violating the Clean Air Act. He agreed to cooperate with federal investigators in exchange for the possibility of receiving a reduced sentence, the affidavit said.

Two other unidentified VW employees who work in the company's engine development department have agreed to cooperate with federal investigators in exchange for agreements that they will not face U.S. prosecution, the affidavit also said.

Around March 2014, VW learned about the results of a West Virginia University study commissioned by the International Council on Clean Transportation, the affidavit said. The findings showed two out of three of VW diesel autos emitted nitrogen dioxide levels up to 40 times the allowable U.S. limit, the affidavit said. But those findings did not turn up when the cars were tested on dynamometers, instead of road tests, as part of U.S. emissions testing.

Schmidt learned of the study findings by April 2, 2014, the affidavit said. Communicating that day with a VW colleague about the company's emission compliance, Schmidt wrote: "It should first be decided whether we are honest," the affidavit said.

"If we are not honest, everything stays as it is," Schmidt added. "ICCT has stupidly just published measurements of NAR [North American Region] diesel off-cycle, not good."

The following month, Schmidt emailed VW's then-chief executive and another employee an analysis of the potential consequences and risks of the study findings. It estimated potential U.S. Environmental Protection Agency penalties as high as $37,500 per vehicle, with as many as 600,000 VW diesel cars affected, the affidavit said.

"Difference between street and test stand must be explained. (Intent = penalty)," Schmidt warned, the affidavit said, adding that the EPA was starting to research the issue.

Contributing: Detroit Free Press reporters Robert Allen and Brent Snavely


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