Dishonesty Always Costs

Published: December 15, 2017

By Jim Lichtman
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Volkswagen Executive Oliver Schmidt just found out the cost of his dishonesty: 7 years in prison.

“Schmidt, a citizen of Germany,” The New York Times writes (Dec. 6), “is the highest-ranking Volkswagen employee to be convicted in [a scheme to defraud U.S. consumers and regulators by participating in] the company’s efforts to rig pollution tests on hundreds of thousands of diesel vehicles imported for sale in the American market.

“But most of those suspected of conspiring to defraud United States regulators are out of reach of American justice in Germany, which normally does not extradite its own citizens. Mr. Schmidt may turn out to suffer the harshest punishment for the emissions fraud even though he was hardly the only participant or the highest ranking.

“The sentencing of Oliver Schmidt, a former Volkswagen manager in Michigan, was the latest turn in a vast scandal that has tarnished the company’s reputation and has cost the carmaker more than $20 billion in fines and settlements.

“The sentence, including a fine of $400,000, was imposed by Judge Sean F. Cox in Federal District Court in Detroit four months after Mr. Schmidt, 48, pleaded guilty to conspiracy to defraud the federal government and to violating the Clean Air Act. The sentence was in line with the prosecution’s recommendation.”

The scheme involved software that was used to dodge pollution limits on nearly 600,000 diesel vehicles in the U.S.

“…Schmidt,” Britain’s Guardian reports (Dec. 6), “a German national who was the general manager in charge of VW’s environmental and engineering office in Michigan, had pleaded guilty to his part in the cover-up and argued he was ‘misused’ by VW in its attempts to circumvent US emissions tests.”

At the sentencing, judge Sean Cox said, “It is my opinion that you are a key conspirator in this scheme to defraud the United States. You saw this as your opportunity to shine … and climb the corporate ladder at VW.”

“Schmidt read a written statement,” The Guardian writes, “in court acknowledging his guilt and broke down when discussing his family’s sacrifices on his behalf since his arrest in January.

“ ‘I made bad decisions and for that I am sorry,’ he said.

“Schmidt, who oversaw emissions at VW’s office in Michigan from 2012 to early 2015, met with key California regulators in 2015 but did not disclose the rogue software.

“The defendant has a leadership role within VW,” federal officials said. “As a consequence of that role, he was literally in the room for important decisions during the height of the criminal scheme.”

The Times adds that “Volkswagen moved to put the scandal behind it in the United States by agreeing this year to plead guilty to felony charges of illegally importing nearly 600,000 vehicles equipped with devices to circumvent emissions standards. It paid $4.3 billion in penalties and was put on probation for three years, with a monitor overseeing its compliance with ethics and regulatory measures.

“Other than Mr. Schmidt, only a company engineer, James Liang, has been sentenced in the United States in the matter, receiving a 40-month term in August after pleading guilty to conspiring to defraud the government and violating the Clean Air Act.”

According to Forbes magazine, as of 2016, Volkswagen is the world’s largest automaker with 10.3 million vehicles worldwide.

After such consequential dishonesty, the next questions that come to mind are, what else has Volkswagen lied about, and why should millions of consumers trust what they say about their product.

“Honesty doesn’t always pay,” ethicist Michael Josephson points out, “but dishonesty always costs.”


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