State and federal settlements totaling $15 billion will provide more than 475,000 owners and lessees of 2009-2015 model year 2.0-liter diesel vehicles with extensive relief, at a maximum cost of just over $10 billion. More than 12,500 vehicles registered in Massachusetts stand to benefit from the settlements, which seek to hold Volkswagen accountable for installing software to cheat emissions tests performed on its diesel vehicles. A related multistate settlement led by Attorney General Maura Healey required Volkswagen to pay more than $570 million to the states for violating state laws prohibiting unfair or deceptive trade practices by marketing, selling and leasing diesel vehicles equipped with illegal and undisclosed defeat device software.
The consumer-related relief received Court approval on October 26, 2016. If you are someone who bought a car eligible for restitution, you have a choice to either sell it back to Volkswagen or wait to have the vehicles' emissions systems modified. Under either option, you will also receive an additional cash payment from Volkswagen ranging from at least $5,100 up to a potential maximum of $10,000. Eligible lessees are also entitled to receive restitution and a choice between buyback and lease termination. Visit VWCourtSettlement.com to check your eligibility to participate.
Here’s what you need to know:
- Volkswagen committed to processing approximately 5,000 bought back cars per week upon settlement approval. The EPA approval process for the vehicle modification option might not be complete for many months, perhaps as late as 2018 for some engine models.
- For now, owners and lessees can continue to drive their vehicles without fixing the emissions systems, even if the car might fail a state inspection. However, at some point in the future, individual states might require Approved Emissions Modifications on eligible vehicles if they are not sold back.
On July 19, 2016, following a months-long investigation by a multistate coalition of over 40 states and other jurisdictions, led by Massachusetts and five other states, Attorney General Maura Healey filed a complaint against Volkswagen, Audi and Porsche for the sale of diesel vehicles (including more than 15,000 in Massachusetts) that were fitted with illegal “defeat devices” that concealed illegal amounts of harmful emissions, and then allegedly attempting to cover-up their behavior.
This lawsuit makes clear that all auto manufacturers that violate the laws designed to protect the environment and public health is unacceptable and will be punished with significant penalties. The AG’s complaint alleges a cover-up managed for nearly a year-and-a-half after a study by researchers alerted authorities that these diesel cars emitted up to 35 times level of legal NOx pollution in everyday driving, but complied with legal limits in emissions test conditions.
The AG’s lawsuit seeks penalties and injunctive relief for VW’s violation of Massachusetts’ comprehensive laws designed to prevent air pollution and holds them accountable for corporate fraud.
A copy of the Massachusetts complaint can be found here file size 12MB.
The current settlement covers only diesel vehicles with the 2.0 liter engines.
Volkswagen, the state attorneys general, federal regulators, and the consumer class action lawyers continue to negotiate about what relief will be available later to owners of the 3.0 liter engines.
The specific 2.0 liter engine vehicles covered by the settlement are the following vehicles purchased or leased in the US:
|Beetle, Beetle Convertible||2013-2015|
Consumers who purchased an affected vehicle have the option of either 1) selling it back to Volkswagen, or 2) having the emissions systems modified with an Approved Emissions Modification. Under either option, consumers will also receive additional restitution from Volkswagen.
Consumers who leased an affected vehicle have a similar option, and can either 1) terminate the lease with no penalty, or 2) have the cars' emission system modified with an Approved Emissions Modification. Under either option, lessees will also receive additional restitution from Volkswagen.
For car owners who choose the buyback option, Volkswagen will pay the National Automobile Dealers Association (“NADA”) value of the car before the Volkswagen’s defeat device fraud became public in September 2015, plus an additional cash payment. The minimum restitution payment for any vehicle—to be paid on top of the vehicle value—will be a minimum of $5,100, and some class members may receive as much as $10,000 in restitution if they choose the buyback option.
For owners who sold the car after September 18, 2015, the settlement divides the restitution payment approximately 50/50 with the current owner.
Car owners who want to keep their vehicle and get it modified to meet the EPA emissions requirements will need to wait for final EPA approval of Volkswagen’s proposed engine modifications. Once a modification is approved, consumers can bring their vehicle into a local dealership to be modified at no cost to them; they also will receive at that time a restitution payment as described above. That means owners who keep their cars will receive between $5,100 and $10,000 each, in addition to the repairs at no cost. Volkswagen will also offer extended warranties and disclosures of the emissions modifications.
Note that the EPA approval process might not be complete for many months, perhaps as late as 2018 for some engine models. Consumers who want to keep their vehicles will therefore need to wait to find out whether their car can be fixed with an Approved Emission Modification.
If a modification for a particular engine type ultimately is not approved, owners who waited for a potential modification would be eligible to get a buyback on the same terms as described above.
Leased Vehicle Options
Lessees may terminate their leases without any termination fee and receive a cash restitution payment equal to approximately half of what the owner of the identical car would receive under the buyback plan. Consumers with an active lease who want to hold on to their cars may choose to wait to see whether there will be an Approved Emissions Modification for their car, as described above. If those lessees elect to keep their cars under their leases with the repairs, they too will receive restitution.
MASSACHUSETTS A.G. HEALEY, NY A.G. SCHNEIDERMAN, MARYLAND A.G. FROSH ANNOUNCE SUITS AGAINST VOLKSWAGEN, AUDI AND PORSCHE ALLEGING THEY KNOWINGLY SOLD OVER 53,000 ILLEGALLY POLLUTING CARS AND SUVS, VIOLATING STATE ENVIRONMENTAL LAWS
Cover-Up Of “Defeat Devices” Was Allegedly Orchestrated And Approved At The Highest Levels Of The Company, Up To And Including Former CEO Martin Winterkorn; German Parent Companies Volkswagen AG And Audi AG Directed US Subsidiaries To Submit False Documents, Make False Claims To New York, Massachusetts And Maryland Authorities
Numerous Employees, Tipped Off By A Senior In-House Lawyer In Germany, Also Destroyed Incriminating Documents, Lawsuits Allege
NEW YORK – New York Attorney General Eric T. Schneiderman, Massachusetts Attorney General Maura Healey and Maryland Attorney General Brian Frosh announced lawsuits today against Volkswagen AG and its affiliates Audi AG and Porsche AG, as well as their American subsidiaries, for the automakers’ sale of diesel automobiles (including over 25,000 in New York, 15,000 in Massachusetts and 12,935 in Maryland) that were fitted with illegal “defeat devices” that concealed illegal amounts of harmful emissions these cars spewed– and then allegedly attempting to cover-up their behavior.
“The allegations against Volkswagen, Audi and Porsche reveal a culture of deeply-rooted corporate arrogance, combined with a conscious disregard for the rule of law and the protection of public health and the environment,” Attorney General Schneiderman said. “These suits should serve as a siren in every corporate board room, that if any company engages in this type of calculated and systematic illegality, we will bring the full force of the law—and seek the stiffest possible sanctions—to protect our citizens.”
“Volkswagen, Audi and Porsche defrauded thousands of Massachusetts consumers, polluted our air, and damaged our environment and then, to make matters worse, plotted a massive cover-up to mislead environmental regulators,” Attorney General Healey said. “With today’s action, we want to make clear to all auto manufacturers that violating laws designed to protect our environment and our public health is unacceptable and will be punished with significant penalties.”
“Maryland has worked tirelessly, through Maryland’s Healthy Air Act and Clean Cars Act, as well as stringent regulations adopted by the Department of the Environment, to clean our air,” said Attorney General Frosh. “As our complaint sets out, Volkswagen, Audi and Porsche installed defeat devices in their cars to trick regulators and to deceive the public; they did so knowing that their conduct was illegal and their misconduct has hindered our efforts to clean the air and to clean the Chesapeake Bay. Their disregard for the health of our citizens and their disregard for our environment must be punished.”
“These automobile manufacturers deliberately deceived the public into believing their cars met emissions standards when in fact they were excessively polluting New York’s air,” said New York DEC Commissioner Basil Seggos. “This corrupt behavior is unacceptable and it undermines our efforts to protect public health and combat climate change. I applaud Attorney Generals Schneiderman and Healy for their important efforts to uphold the integrity of our clean air regulations.”
“The emission rules are in place to protect public health and the environment,” said Martin Suuberg, Commissioner at the Massachusetts Department of Environmental Protection (MassDEP). “This action underscores the serious nature of the violations.”
“The air Marylanders now breathe is the cleanest it’s been in decades, and we will not stand for Volkswagen's dirty tactics that undercut our environmental progress,” said Maryland Secretary of the Environment Ben Grumbles. “The Hogan Administration is committed to reducing pollution from tailpipes and power plants and holding accountable those who threaten the health and well being of our communities and watersheds. Volkswagen must get its act in gear and pay the price for breaking some of the most stringent laws in the country protecting the waters, lands and lungs of Marylanders in the Chesapeake Bay region.”
These lawsuits by the New York, Massachusetts and Maryland Attorneys General offices follow a nine-month long investigation by a multistate coalition of over 40 states and other jurisdictions, led by New York, Massachusetts, and four other states. New York State’s Department of Environmental Conservation, Massachusetts’s Department of Environmental Protection and Maryland’s Department of the Environment provided important assistance with the investigation.
The complaints allege, in detail, a cover-up that Volkswagen and Audi allegedly managed for nearly a year-and-a-half. The cover-up followed a study by researchers at West Virginia University that alerted authorities in this country that these diesel cars emitted much more nitrogen oxides (NOx) when driven on the road than they did when undergoing emissions testing on test equipment used by the U.S. Environmental Protection Agency (EPA) and the California Air Resource Board (CARB) to test the amount of air pollutants emitted by automobiles.
These suits follow the car companies’ partial settlements of claims for consumer relief and consumer deception penalties, as well as their agreement to establish a fund to mitigate the environmental damage caused by their admitted misconduct. Those earlier settlements did not resolve any of the claims for civil penalties that New York, Massachusetts and other states, as well as the EPA, may bring for the companies’ flagrant violations of state and federal environmental laws and regulations, nor did the settlements cover all of the vehicles equipped with emission control defeat devices.
The lawsuits allege that, after the EPA and CARB contacted Volkswagen and Audi about the discrepancies revealed by the West Virginia University study -- which the companies fully knew were caused by their defeat devices – Audi and Volkswagen:
- Tried to cover up the problem through sham recalls that they knew would not meet the required standards;
- Repeatedly failed to disclose to regulators the true reason – the defeat devices – for the discrepancies; and
- Only confessed to the defeat devices when they knew the regulators had them pinned to the facts.
The lawsuits allege this cover-up was orchestrated and approved at the highest levels of the company, up to and including the former CEO, Martin Winterkorn.
Throughout this entire course of alleged illegal conduct, in which dozens of employees, officers and senior executives were involved, the investigation found no evidence that a single Volkswagen, Audi or Porsche employee came forward to blow the whistle.
As alleged in the complaints, Volkswagen’s response to the scandal shows that the company has not reformed its corporate behavior. When the investigation was getting under way in late 2015, numerous employees, tipped off by a senior in-house lawyer in Germany, allegedly destroyed incriminating documents. Just last month, the Volkswagen Supervisory Board recommended a package of bonuses for the Management Board that presided over the cover-up totaling over $70 million, including generous severance pay to Mr. Winterkorn himself. That recommendation was overwhelmingly approved by the company’s shareholders.
The Attorneys Generals’ investigation also found evidence that the misconduct of Volkswagen and its Audi and Porsche subsidiaries in the production and sale of these automobiles has few parallels in corporate history.
Specifically, the complaint alleges, that:
- These three affiliated brands made a knowing decision to violate the laws of New York, Massachusetts, Maryland, and other states not just once, but over and over again. There was not just one defeat device that cheated on emissions tests, but six, with the first going back to Audi’s European-market cars in the mid-2000’s.
- Starting in 2008, Volkswagen and Audi, and later Porsche, began installing these defeat devices in several generations of US-market Volkswagen and Audi diesel engines that equipped over a dozen models, including flagship Audi luxury sedans and high-performance Porsche SUVs, with sales eventually totaling over 25,000 vehicles in New York State, 15,000 in Massachusetts, and 13,000 in Maryland before being pulled from sale last year.
- The defeat devices took the form of computer software designed to ensure that a vehicle's emissions system performed properly only during emissions testing. On the road, the defeat device switched off or scaled back the vehicles’ emissions systems, with the result that the cars and SUVs emitted NOx – a harmful pollutant linked to numerous respiratory diseases – far above allowable limits, indeed up to 40 times those limits.
- Despite their reputations for engineering excellence, Volkswagen, Audi and Porsche resorted to the illegal defeat devices to enable them to equip their cars with shoddy emissions systems that in many cases would have broken down, without the defeat devices, in less than 50,000 miles, contrary to the durability assurances the automakers had falsely given to regulators.
- In other cases – for example, on the high-end V6 diesel engines that equipped the Porsche, Volkswagen and Audi SUVs and Audi luxury sedans, vehicles that use a urea-based liquid as part of the emissions control system – the automakers installed defeat devices to compensate for the companies’ unwillingness either to make the tanks that hold urea large enough to properly serve the cars’ emissions system, or to reduce the intervals between urea refills in a manner they believed would turn off diesel car owners. In these vehicles, the defeat devices limited dosing of the urea-based liquid into the emissions system, again driving up harmful NOx emissions far past their legal limits.
- Volkswagen and Audi researched the laws in this country and previous enforcement cases before embarking on this course. They knew what they were going to do was illegal, and if caught they would face government enforcement and sanctions. They went ahead and did it anyway.
- As a result, the complaints allege that consumers in New York, Massachusetts, Maryland and around the country did not receive what they were sold – a “clean” “green” diesel car that the Volkswagen companies aggressively touted. Indeed, Volkswagen, Audi and Porsche expressly and repeatedly promised consumers that they could have the best of all worlds by purchasing a car or SUV with both outstanding power and excellent environmental performance – and charged high mark-ups on the bases of these claims – claims that Audi and Volkswagen knew to be blatantly false.
- As a further result, the complaints allege that thousands of excess tons of NOx were illegally spewed onto city and rural streets around the country, leaving many of residents at greater risk of asthma and other respiratory diseases, and driving up the formation of harmful ozone in the atmosphere. New York—in particular the New York City metropolitan area—has harmful levels of smog pollution, one of the main reasons the State adopted strict car emission standards to combat this problem. New York’s complaint alleges that the companies’ conduct has made it more difficult to clean up New York’s air to levels that are adequate to protect public health. Massachusetts also experiences the harmful effects of smog: every year, the Department of Environmental Protection issues air quality alerts on numerous days because ozone levels make the air unhealthy to breathe. Maryland has recorded some of the highest ozone levels in the Eastern United States, and is subject to the perfect storm for ozone air pollution, where unique meteorology and geography line up with transported pollution from power plants in the west and local pollution from the south, primarily cars along the I-95 corridor.
Today’s lawsuits make clear that substantial penalties must be imposed on the Volkswagen companies, above and beyond the amount they have to pay to make American consumers whole and redress the environmental harm they have caused.
The strongest message possible has to be sent: you cannot deliberately flout the laws of New York, Massachusetts, Maryland, and every other state, and not be severely penalized. Neither Volkswagen, nor any other car manufacturer, should ever again conclude that it can engage in this behavior as part of the cost of doing business.
New York Attorney General Schneiderman thanks the New York State Department of Environmental Conservation for its help in this matter. Massachusetts Attorney General Healey thanks the Massachusetts Department of Environmental Protection for its assistance. Maryland Attorney General Frosh thanks the Department of Environment for its assistance.
A copy of the New York complaint can be found here.
The New York case is being handled by Senior Enforcement Counsel David Nachman; Deputy Bureau Chief Lisa Burianek, Affirmative Litigation Section Chief Michael Myers, and Assistant Attorneys General John Turrettini, Brian Lusignan and Morgan Costello, Environmental Policy Advisor Peter Washburn and Chief Scientist Alan Belensz of the Environmental Protection Bureau; Assistant Attorney General Noah Popp of the Consumer Protection Bureau; Senior Trial Counsel David Ellenhorn; and with the assistance of Laura Sarli of the Investor Protection Bureau. The Environmental Protection Bureau is led by Bureau Chief Lemuel Srolovic and the Social Justice Division is led by Alvin Bragg.
The case is being handled in Massachusetts by Gillian Feiner, Chief of AG Healey’s False Claims Division, First Assistant Attorney General Christopher Barry-Smith, Christophe Courchesne, Chief of AG Healey’s Environmental Protection Division, Peter Mulcahy, Assistant Attorney General in AG Healey’s Environmental Protection Division, with critical assistance from Assistant Attorneys General Diane Barry and Gary Klein, along with Attorney Meghan Mackenzie, and Paralegal Krista Roche.
The Maryland lawsuit is being handled by Assistant Attorney General Roberta James.