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On Wednesday, six senior VW Group executives were indicted by the Justice Department on multiple counts of conspiracy and intent to defraud.
The charges include conspiracy to defraud the United States, to defraud customers, and to violate the Clean Air Act. All stemmed from the Volkswagen diesel scandal that erupted in September 2015.
Over the weekend, Oliver Schmidt—who led the automaker's regulatory compliance group from 2014 to early 2015—was arrested by the Federal Bureau of Investigation while on vacation in MIami.
The company itself has now pleaded guilty to a similar array of criminal charges, in a $4.3 billion deal it signed with numerous regulatory agencies this week in the waning days of the current presidential administration.
But that settlement does not preclude the Justice Department from holding individual executives responsible for criminal acts.
Schmidt is the first high-profile Volkswagen executive to have been arrested since news of the scandal broke. He was intercepted in Miami while returning to Germany after a vacation.
2015 Volkswagen Golf TDI SEEnlarge Photo
The five additional indictments were issued to Heinz-Jakob Neusser, the former R&D boss for the Volkswagen brand; Jens Hadler, head of engine development; Richard Dorenkamp, a supervisor on the engine development team; Bernd Gottweis, head of quality management; and Jürgen Peter, a liaison between regulators and the automaker.
The Department of Justice said all six were involved in the development of Volkswagen engines—and were directly responsible for issuing orders to install the illegal TDI "defeat device" software.
Germany does not normally extradite its citizens if they are charged with crimes in other countries. The chances that any of the five will be arrested are thought to be remote.
Lawyers for some of VW's Germany-based executives had advised them not to travel to the U.S. while the Department of Justice was preparing to charge more company officials, Bloomberg reported.
But Schmidt's decision to vacation in the U.S. gave the FBI a rare opportunity to pounce, noted The New York Times (subscription required).
The saga began 15 months ago with the stunning revelation by the U.S. Environmental Protection Agency that VW had admitted using illegal "defeat device" software in diesel cars to cheat on emissions tests.
On Wednesday, the Justice Department announced that VW itself would pay $4.3 billion in criminal and civil penalties in relation to the diesel scandal.
Several Volkswagen executives have been in the U.S. this week attending the 2017 Detroit Auto Show, but no arrests were reported.
2010 Volkswagen Golf TDIEnlarge Photo
Schmidt specifically is charged with participating in the coverup of "defeat device" software in VW diesel cars.
He was publicly an evangelist for the benefits of Volkswagen's TDI diesel models, although that was a posture he had apparently adopted only in recent years.
Prior to taking charge of regulatory compliance, Schmidt headed "Project Moonraker," in which a group of VW engineers were sent to live in California in 2005 to study and understand U.S. consumers better.
The goal was to educate the company's product developers so Volkswagen could tailor more models to the U.S. market, to meet its goal of selling 800,000 vehicles in the country by 2018. (That goal has now been abandoned.)
Among green technologies, Moonraker—and Schmidt—concluded that Volkswagen should emphasize plug-in hybrids.
But that result was not accepted by executives in Germany, according to a person familiar with the project, and Schmidt became an advocate for VW's so-called Clean Diesel initiative.
Volkswagen Golf GTE Plug-In Hybrid - 2014 Geneva Auto Show live photosEnlarge Photo
Since Schmidt's arrest, prosecutors in South Korean have indicted seven current and former VW executives and staff, as well as one contractor.
They are charged with alleged violations of the country's Clean Air Conservation Act, related to emissions cheating with the "defeat device" software.