Pollution and Prosecution: The Ongoing VW Diesel Saga

No sooner had German prosecutors obtained Volkswagen’s agreement to pay a one-billion-euro (US$1.2 billion) fine in connection with its diesel emissions cheating, that they took their first action against VW group’s management board by arresting Rupert Stadler, Audi’s CEO, early Monday June 18th at his home in Ingolstadt, Germany.

Munich prosecutors said they had arrested Stadler, 55, because it was alleged that he posed a risk for evidence tampering.  Sueddeutsche Zeitung (Germany’s largest broadsheet newspaper) reported prosecutors had reached this conclusion after wiretapping Stadler’s phone, and raiding his home while investigating for fraud and falsification of public documents in connection with Volkswagen’s sale of diesel cars in Europe.

Prosecutor Stephan Necknig was quoted as saying Stadler was willing to be questioned later that week, and his lawyers wouldn’t be challenging his arrest for now.  In Germany, pretrial detention can be extended beyond the three-month limit, although cooperative suspects usually leave custody sooner.

The arrest of Mr. Stadler was said to have caught Volkswagen AG’s board caught by surprise.  Audi is a critically important division of the VW group, its largest profit contributor and an important technology provider to a number of the group’s brands — including Porsche.  Mr. Stadler, who has led Audi since 2007, has maintained the backing of VW’s controlling Porsche and Piech families despite, as one reporter put it, “a constant drumbeat of allegations ever since Audi got embroiled in the diesel scandal in November 2015.”

One alleged example:  Ulrich Weiss, a former top engineer at Audi’s engine development operation, last year reportedly suggested to a German labour court that Mr. Stadler had been aware of the illegal software earlier than he admitted.

Meanwhile, in Canada, environmental groups have recently expressed their displeasure with what they allege is Ottawa’s inaction with respect to pursuing action against Volkswagen.  On BNN last week, Kim Perrotta, Executive Director of the Canadian Association of Physicians for the Environment said while the US government has prosecuted Volkswagen for this fraud — the company plead guilty and will pay a $15 billion settlement — Canadian law enforcers appear to have done less than might be expected.

In particular, Ms. Perrotta said, if Canada is at least investigating, they will not open another investigation as her group as requested, nor provide it with regular reports on the progress they are making, as the Canadian Environmental Protection Act (CEPA) arguably requires of the federal Ministry of the Environment.  She also interprets CEPA as giving Canadian citizens the right to know whether or not the government is taking action on an environmental file like this one.

Ms. Perrotta says her group is taking action to get action for two reasons.  Volkswagen’s confessed actions have created a possible human health issue that needs to be addressed.  Penalties and fines may provide funding for the necessary cleanup efforts.  Secondly, governmental inaction sends the wrong message to other potential offenders especially if this type of cheating is more widespread than currently known, as some are saying is possible.  As to why Ottawa is so slow, Ms. Perrotta said Canada has lagged on this and shown itself not good at enforcing its laws.