Volkswagen’s Unbalanced Justice

We’ve been covering the VW diesel emissions scandal for years but every once in awhile, a new angle pops up that demands attention. Late last month, the New York Times reported on the spine-chilling discovery that Volkswagen – producer of Hilter’s car for “the people” - was gassing moneys with diesel exhaust. If you’d like to see footage of this disturbing cruelty, check out Alex Gibney’s Episode #1 in the new Netflix series, Dirty Money.

And while monkey-gassing might be the most sensational new piece of the VW story, Gibney also shows how strong enforcement of EPA’s regulations (now being famously destroyed by Trump and EPA chief Scott Pruitt) together with documents uncovered during litigation (which the U.S. House has already voted largely to destroy) were the reasons the world even found out about this massive corporate crime.

It’s another reminder of how the U.S. regulatory structure and civil justice system should be sources of national pride, not the focus of attacks by some politicians.

As Consumer Reports wrote a few months ago:

Volkswagen has admitted to circumventing the emissions control system in about 550,000 vehicles sold in the United States since 2008 with the 2.0-liter diesel engine. As many as 11 million vehicles worldwide may be affected.

This has resulted in a $14.7 billion settlement to compensate car owners and address environmental harm. Reflecting the severity of the emissions deception, this agreement is massive in breadth and scope.

The deal is tough, strong, and consumer-oriented. It is significantly bigger than the civil penalties paid by other automakers, namely the more than $2 billion General Motors has paid so far over faulty ignition switches and the $1.4 billion Toyota paid over acceleration issues, according to the New York Times.

This week Fortune wrote an extensive piece contrasting how the U.S. has handled this scandal vs. elsewhere, specifically Europe and especially Germany. There are huge differences regarding how victims have been compensated and how VW and its executives have been held accountable for violating environmental laws and regulations. For example,

[In] Germany and Europe … VW has not offered compensation to any customer. In Germany, where the key decisions were made and all the decision makers reside, no criminal or administrative fines or penalties have yet been imposed.…

The company has also insisted non-American customers suffered no injury.…

Under E.U. rules, all 8 million E.U. customers who bought Dieselgate cars could theoretically sue in Lower Saxony, where VW AG is based. But in Germany there are no consumer class actions. In addition, plaintiffs have very limited discovery rights; lawyers are prohibited from accepting contingency fees; and plaintiffs who sue run the risk that if they lose, they will have to pay not just their own legal fees, but a portion of their adversary’s, as well.…

European and, especially, German industrial, labor, and even environmental policy favored the production of diesel cars. Regulatory oversight was slight, penalties for violations were trifling, and national regulators were disinclined to handicap their home country’s carmakers vis-à-vis those of neighboring countries, whose regulators were presumed to be winking at the same gamesmanship.…

The regulatory, environmental, and cultural gap between the E.U. and the U.S. is closing. But it was that chasm that spawned Dieselgate, and that chasm that Oliver Schmidt [who was criminally-convicted in the U.S.] toppled into.…

Indeed, scores of consumer lawsuits have been tried in Germany and Volkswagen appears to be winning most of them, according to newspaper accounts and interviews with three European plaintiffs lawyers.

Now and then, justice does indeed prevail in America. Good to remember that.