Brent Snavely

Detroit Free Press

Volkswagen is scheduled to appear in court today to plead guilty to fraud, obstruction of justice and for misrepresenting the capability of vehicles with diesel engines it imported into the U.S.

The world's largest automaker agreed to pay $4.3 billion in fines and penalties in January but that deal still must be approved by a federal judge, and an executive representing the company is expected to appear in court.

The agreement includes a commitment to pay a $2.8-billion criminal fine and $1.5 billion to settle environmental, customs and financial violations.

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If approved, it will be among the largest criminal settlements ever extracted from an automaker by the U.S. government. The deal also comes on the heels of Takata's guilty plea and agreement on Feb. 27 to pay $1 billion after pleading guilty to concealing data for more than a decade that showed its air bags could be at risk of exploding and harming passengers under certain conditions.

Volkswagen is charged with participating in a conspiracy to defraud the U.S. and U.S. customers, violating the Clean Air Act and obstructing justice by destroying documents, according to the U.S. Department of Justice.

Back in 2005 or 2006, the automaker designed software for its diesel engines that can detect when a car is being tested for nitrogen oxide emissions in lab conditions. The software would alter the calibration of the diesel engines and reduce the emissions during testing. In real-world conditions, the emissions, at times, spewed 35 times the legal limit of nitrogen oxides.

Volkswagen's criminal settlement is higher than the $900 million that General Motors agreed to pay in 2015 to settle the recall of millions of faulty ignition switches linked to more than 120 deaths and much more than the $1.2 billion Toyota agreed to pay for concealing defects connected to the recall of more than 10 million vehicles at risk of unintended acceleration.

Still, Volkswagen's deal with the government faces opposition. Lawyers representing about 3,600 owners of Volkswagen vehicles with diesel engines filed an objection to the government's proposed settlement last week.

Steven Webster, who represents some of those owners, argues that the government is offering Germany-based Volkswagen AG a deal that gives its U.S. subsidiary — Volkswagen Group of America — immunity from other criminal lawsuits filed across the country by individuals, and criticizes the government's deal for neglecting to set aside funds for individuals.

"It is unclear to me why the government has agreed with a foreign corporation ... that they should not pay restitution to American consumers who have a statutory right to that restitution," Webster said.

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Webster said that while the federal government has accused the parent company of fraud, the automaker's U.S. subsidiary, which has a research and design center in Auburn Hills, was wrongly left out.

Webster notes that even the government argues that Volkswagen's engineering and environmental office, located in Auburn Hills, was in charge of handling the certification process of the diesel engines with the Environmental Protection Agency and lied in meetings to the agency.

"The proposed plea agreement gives Volkswagen of America complete immunity for its criminal actions over a decade but fails to offer any justification for doing so," Webster argues in court documents.

But Volkswagen and the U.S. Department of Justice, in a document they filed together in court, argue that consumers are already eligible for "an efficient and comprehensive mechanism for achieving consumer restitution" through separate civil settlements.

Last year, Volkswagen agreed to settlements worth about $14.7 billion for U.S. consumers and dealers who own diesel vehicles affected by the scandal, authorizing buybacks and free fixes.

"After months of extensive negotiations ... two class-action settlements were reached that provide more than full restitution to all current and former owners," Volkswagen and the Justice Department said. "More than 99% of the 490,000 settlement-class members ... accepted that settlement, reflecting their almost-unanimous agreement that the settlement provides for fair restitution."

According to Consumer Reports, owners with 2009 to 2012 models will get a buyback plus additional cash. For people who want to hold on to their vehicles, there will be a government-approved repair to make the engines cleaner, plus a cash payment. Owners with 2013 to 2016 models will get cash payments ranging from $8,500 to $17,600 if Volkswagen gets a recall fix approved by December.

Consumers Union, the policy and product safety advocate that also publishes Consumer Reports, said the agreement "forces Volkswagen to make consumers whole, after having ripped them off. We’re pleased that VW owners and lessees have the option to choose what to do with their faulty cars, and get significant cash compensation regardless of their choice,” said William Wallace, policy analyst for Consumers Union.

The U.S. government also indicted six Volkswagen executives and managers employees in January. An engineer, James R. Liang, pleaded guilty to one count of conspiracy to defraud the U.S. last fall. A manager, Oliver Schmidt, pleaded not guilty last month to several charges and is scheduled to go to trial next month in Detroit.

Contact Brent Snavely: 313-222-6512 or bsnavely@freepress.com. Follow him on Twitter @BrentSnavely.