The Department of Justice has found Volkswagen liable for criminal wrongdoing, CNBC first reported.
Volkswagen is expected to face criminal and civil penalties for violating the Clean Air Act by installing software on vehicles that violates environmental standards meant to reduce smog, but prosecutors have yet to decide the specific criminal charges they might bring against the automaker.
The Wall Street Journal reports that the Department of Justice is negotiating a settlement with Volkswagen. The German car maker is expected to face charges and significant financial penalties, people familiar with the matter told the WSJ.
The penalties could exceed the $1.2 billion Toyota had to pay for intentionally concealing unintended acceleration problems, the WSJ reports. The $1.2 billion charge is the largest criminal penalty ever imposed on an American automaker to-date.
The Department of Justice and Volkswagen did not immediately respond to Business Insider's request for comment.
The emissions scandal
Volkswagen installed the software on almost 500,000 diesel vehicles in the U.S., according to an EPA press release from September.
The software, known as a “defeat device,” conceals the cars’ emissions of nitrogen oxide, a pollutant that contributes to the creation of smog and ozone and causes health issues like asthma attacks.
The installed software is designed to turn on full emissions control systems only when the car is undergoing official emissions testing, but neglects to do the same during normal driving situations when Volkswagens pollute far more heavily.
This means that during testing the the cars are meeting emissions standards, but are emitting nitrogen oxides up to 40 times the standard when the car is in actual use, according to the EPA.
Volkswagen CEO Martin Winterkorn stepped down in September as a result of the emissions scandal. "As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the Volkswagen Group," he wrote at the time.
Volkswagen admitted to installing the emissions-cheating software. The automaker expected to receive credit from prosecutors for cooperating with the probe and agreeing to a civil accord in June with regulators and consumers that could separately cost the automaker up to $15 billion, the WSJ also reports. The credit could reduce the financial penalty Volkswagen receives, among other things, in the final settlement with the Department of Justice.
Volkswagen set aside roughly $21 billion to deal with the fallout, the WSJ reports. As part of its civil accord in June, Volkswagen agreed to pay $10 billion to repurchase cars from consumers and another $4.7 billion on environmental remediation and investments in zero-emission vehicles like electric cars.
Affected diesel models include the 2009-15 Audi A3, the 2009–15 Beetle, the 2009–15 Golf, the 2014-15 Passat and the 2009-15 Volkswagen Jetta. The EPA allegations include about 482,000 diesel passenger cars that have been sold since 2009 in the United States.
The defeat device was uncovered by independent researchers at West Virginia University working with the International Council on Clean Transportation.
This story is breaking. We'll update as we hear more.