Mac Matarieh
Associate Editor
Loyola University Chicago School of Law, JD 2018
Volkswagen installed emission software that allowed more than a half-million diesel cars in the United States to cheat the emissions test set by the Environmental Protection Agency (EPA). Volkswagen has since recalled millions of vehicles and has reached a nearly $15 billion settlement in the United States. Volkswagen hired Christine Hohmann-Dennhardt as their new compliance chief to turn the companies’ policies and ethics in the right direction. Less than a year since joining Volkswagen, Hohmann-Dennhardt will be parting ways with Volkswagen, bringing the company back to square one with their compliance initiatives.
In September of 2015, the EPA discovered that many Volkswagen vehicles in the United States had a “defeat device” or software in diesel engine vehicles. The defeat device would recognize when the vehicle was going through an emissions test to measure carbon dioxide emission levels and would change the performance of the vehicle to improve the results. The EPA found 482,000 vehicles in the US alone, but Volkswagen admitted that about 11 million vehicles worldwide were fitted with the software.
What has happened since Volkswagen admitted to the scandal?
Volkswagen recalled millions of cars that were set to be released in early 2016 and set aside nearly $7.2 billion (€6.7 billion) to cover the costs. U.S. District Court Judge Charles Breyer approved a $14.6 billion settlement in October of 2016. In January of this year, the U.S. Department of Justice announced $4.3 billion in criminal and civil penalties and six Volkswagen executives were arrested for their connection with the scandal. Furthermore, a corporate compliance monitor will be watching Volkswagen for three years under the terms of its probation.
Volkswagen must buy back 85% of all cars by June of 2019 or pay to fund state-level projects to reduce nitrogen-oxide emissions under the EPA’s reduction act. Moreover, Volkswagen must spend $2 billion over the next 10 years to invest in green energy and electric cars.
Volkswagen’s Compliance Chief Steps Down
Christine Hohmann-Dennhardt was hired in early 2016 in response to the emissions scandal. Late last week news broke that Dennhardt was to leave the management board based on differences of opinion regarding her role. Volkswagen issued a statement saying that Dennhardt was leaving “due to differences in their understanding of responsibilities of future operating structures within the function she leads.” To make matters worse, Volkswagen reported that the former chief executive Martin Winterkorn was a suspect in a fraud investigation brought by the German government.
What does this mean for compliance at Volkswagen?
The emissions scandal was more than detrimental to Volkswagen. It is evident that internal monitoring and auditing through compliance was ignored while the scandal occurred. Furthermore, Volkswagen did not implement their compliance standards properly, causing the scandal to unfold at an alarming rate. It is difficult to say where things went wrong for Volkswagen, but moving forward training must be a major focus for the car company. Although it was not until Volkswagen was investigated that they admitted to the scandal, they did take appropriate action responding to the offenses and attempted to take the proper steps moving forward.
The departure of Volkswagen’s head of compliance brings about another alarming scenario for Volkswagen. In just under a year, after one of the largest compliance breakdowns in recent history, the person hired to implement reforms has left the company. Some might argue that Volkswagen is not taking the effects of the scandal seriously and that their culture of compliance is at a major risk. Only time will tell if Volkswagen will be able to truly bounce back from the effects of this scandal. They are not off to a good start.