Blumenthal, Schumer Demand EPA and DOJ Levy $18 Billion, Maximum Penalty Against Volkswagen Following Deliberate and Deceptive Fraud

(Hartford, CT) - U.S. Senators Richard Blumenthal (D-Conn.) and Charles E. Schumer (D-N.Y.) called on the U.S. Environmental Protection Agency (EPA), in conjunction with the Department of Justice, to levy the maximum possible fine of $18 billion against Volkswagen following reports that the company may have intentionally developed and implemented software designed to trick emission testers and approximately 482,000 consumers. The “defeat devices” were used by Volkswagen to circumvent EPA emission standards during normal driving operations and deceive testers during emission tests in laboratories or testing stations. Blumenthal and Schumer said that the maximum possible fine of $18 billion would result in approximately $37,500 per offending car.

Moreover, Blumenthal and Schumer explained that both affected consumers and U.S. taxpayers should be made whole by Volkswagen. Blumenthal and Schumer said that many affected consumers may have purchased the diesel Volkswagen vehicles because of their energy efficiency and were thus deceived by the company. In addition, the resale value of the car may never be recovered. Therefore, Blumenthal and Schumer are urging the EPA to ensure that any potential settlement includes substantial rebates to affected consumers. 

Blumenthal and Schumer are also urging the EPA to ensure that any potential federal settlement include full reimbursement to the United States Treasury of any tax credit or other federal repayment received on behalf of the fraudulent cars. According to reports, Volkswagen may have received upwards of $200 million in tax credits and other federal incentives because of the vehicles’ energy efficiency. Schumer and Blumenthal said that Volkswagen should be forced to pay these incentives back, as it may constitute as a form of tax fraud because the cars did not actually meet many of the IRS’s qualifications for receiving these credits.

Senator Blumenthal said: “Volkswagen willfully deceived over 11 million car owners worldwide, knowingly and fraudulently installing defeat devices that allowed their diesel vehicles to cheat emissions testing while emitting 40 times the allowed levels of pollution. The Department of Justice must conduct a thorough and vigorous investigation, holding executives personally responsible for any criminal acts, and the EPA must ensure that VW pays back tax credits and other federal benefits it received. Volkswagen buyers must be fully compensated for this outrageous harm—including an offer to buy back every car, or separately pay for resale price loss. Asking owners to wait up to two years for a fix—that may ultimately drive down gas mileage and impact performance—is unacceptable. Volkswagen must immediately repay owners for the significant loss in value these cars have sustained as a result of this massive fraud.”

“This deliberately deceptive and massive fraud by Volkswagen is breathtaking and must be swiftly dealt with,” said Senator Schumer. “The EPA must do the right thing here and impose the full fine of $18 billion on Volkswagen and then work to ensure impacted consumers receive recoupment. Whether a rebate or a refund, American consumers who bought these sham cars deserve to recoup thousands for the lie and this incredible inconvenience. Moreover, taxpayers and the federal government – which provided upwards of $200 million in ill-gotten tax credits to VW -- must be made whole as soon as possible. Volkswagen used bogus standards to drive profits and accelerate their market share. None of this was fair to the American consumer or the taxpayers, and we must do all we can to make them whole and to send a message to would-be wrongdoers that this must never happen again.”  

Blumenthal and Schumer said that Volkswagen’s deceitful actions demonstrate a clear and calculating choice to violate the Clean Air Act, and, therefore, more should be done to send a clear message that these types of actions will not be tolerated. In his letter to EPA Administrator McCarthy, Schumer and Blumenthal said Volkswagen should be penalized in three specific ways.

• First, Blumenthal and Schumer are urging the EPA to levy the maximum possible fine against Volkswagen, estimated at approximately $18 billion or $37,500 per offending car.

• Second, Blumenthal and Schumer are urging for any potential settlement negotiated on behalf of defrauded Volkswagen consumers to include substantial rebates to affected customers who own Volkswagen diesel cars equipped with “defeat devices.”

• Lastly, Blumenthal and Schumer said that consumers and the federal taxpayer should be made whole again. Schumer and Blumenthal said that, according to media reports, federal taxpayers may have provided up to $51.5 million in federal fuel efficiency tax credits; $150 million in Advanced Manufacturing Tax Credits from the Department of Energy; and approximately $20.7 million through the “Cash for Clunkers” federal rebate program. Blumenthal and Schumer are calling for full reimbursement to the United States Treasury of any tax credit, rebate or other federal repayment received on behalf of the fraudulent cars.

On September 18^th, the EPA issued a notice of violation of the Clean Air Act to Volkswagen and accused the company of installing approximately 482,000 diesel passenger cars with sophisticated software that deceived emission tests. Under the Clean Air Act, vehicle manufacturers are required to certify to the EPA that their products meet applicable federal emission standards to control air pollution, and every vehicle sold in the United States must be covered by an EPA-issued certified of conformity. According to the EPA,  four-cylinder Volkswagen and Audi diesel cars from model years 2009-2015 included defeat devices that circumvents EPA emissions standards for certain air pollutants. An algorithm in the software of the device can detect when the car is undergoing official emissions testing and turns full emissions control on only during the test. However, during all other normal driving situations, the effectiveness of the vehicle’s pollution emissions is greatly reduced. Therefore, according to the EPA, the cars would meet emissions standards in the laboratory or testing station, however, emit nitrogen oxides 10 to 40 times the standard during normal driving operations.  According to Volkswagen, as many as 11 million of its diesel cars worldwide were equipped with the defeat device software.

Owners of affected Volkswagen diesel vehicles will likely receive a recall notice with instructions on how to have their car repaired at no cost.  According to the EPA, affected vehicles include Jetta (MY 2009-2015), Jetta Sportwagen (MY 2009-2014), Beetle (MY 2012- 2015), Beetle Convertible (MY 2012-2015), Audi A3 (MY 2010-2015), Golf (MY 2010-2015), Golf Sportwagen (MY 2015), Passat (MY 2012-2015). Schumer and Blumenthal today said that consumers and taxpayers should be entitled to much more than a car repair at no cost, all that is currently being offered to those affected by the recall.

Blumenthal and Schumer said that U.S. taxpayers have fallen victim to Volkswagen’s deceit. For instance, an L.A. Times report suggests that the Internal Revenue Service (IRS) may have provided up to $51.5 million in tax incentive credits for affected Volkswagen diesel vehicles. According to the IRS, the Alternative Motor Vehicle Credit provides a tax credit that is subtracted directly from the total amount of federal tax owed and is applied to hybrid vehicles purchased or placed in service on or after January 1, 2006. Purchasers of advanced lean burn technology motor vehicles, like some of the affected Volkswagen diesel vehicles, may claim a credit of $1,300 per vehicle. Specifically, the Volkswagen 2009 Jetta (2.0L TDI Sedan manual and automatic) and Volkswagen 2009 Sportwagen (2.0L TDI manual and automatic) were eligible for this tax credit.

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