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U.S. Department of Justice Files Civil Suit Against Volkswagen

By: Bridget ClerkinJanuary 6, 2016
VW-TDI-Recall
The US Department of Justice has filed suit against VW after the recent diesel scandal.

Nearly 4 months after its spectacular fall from grace following an international emissions scandal, Volkswagen is poised to sink even lower, as the United States government makes its first legal overture into the case.

The Department of Justice (DOJ) filed a $48 billion civil suit against the carmaker Monday, saying it was in violation of the Clean Air Act when it installed technology in nearly 600,000 engines in America that would allow the cars to “cheat” on emissions tests.

Filed on behalf of the Environmental Protection Agency (EPA), the statement alleges that VW’s misrepresentation of the cars’ gas efficiency to the U.S. government allowed the company to “emit excessive air pollution across the country, harming our health and cheating consumers.”

To win, the government must simply prove that the “cheating” occurred. Volkswagen officials already admitted to installing such technology—which tells the car to run a different, more carbon-efficient system while being tested, then switch to a different, more emission-ridden system while driving on the road—shortly after the scandal broke.

While it’s likely the case will be settled for a much lower price—such as when Toyota paid just $34 million in a pair of lawsuits after being sued for a collective $58 billion by the U.S. government in 2010 and 2012—Reuters estimates that the DOJ could impose fines of up to $37,500 per vehicle fitted with the technology.

Already, the $48 billion figure represents an elevation from the original $18 million U.S. regulators estimated Volkswagen could owe in September.

Either way, the imposing number is likely meant by the government to make a statement, and VW stock holders are listening. The company suffered a 6-week low for stock prices the day after the complaint was filed.

While the car manufacturer had made a modest recovery late last year after announcing a fix for 8.5 million of the estimated 11 million affected cars worldwide, market action after the civil suit was filed set the company back to 22 percent below it’s pre-scandal stock price.

But Volkswagen could end up losing even more, as the current DOJ civil suit does not prevent the department from lodging a criminal complaint against the carmaker.

To stick, the criminal charges would require a higher burden of proof—specifically, the government would have to prove that VW intentionally deceived the EPA—although one Justice Department official told Reuters, “We’re alleging that they knew what they were doing, they intentionally violated the law, and that the consequences were significant to health.”

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