Once A Cheat, Always A Cheat?

Here’s an interesting post written by our associate attorney Ashley Franco about the recent Volkswagen scandal:

In 1973 Volkswagen (VW) settled with the Justice Department for $120,000 for cheating on its emissions test.  Now more than forty years later, Volkswagen has again been caught cheating on its emissions test.  Apparently VW installed software in its diesel vehicles which was specifically designed to pass emissions tests without actually being in compliance.

So what exactly is the harm done by Volkswagen?  The Environmental Protection Agency states that the cheating software allows specific VW models to pass emissions test while actually emitting more than 40 times the legal limit.  This means that the VW vehicles with the cheating software emit 40 times more that the amount of harmful fumes allowed.  VW has admitted to creating the software specifically to lower the emissions reported by its vehicles during inspections.  Cheating on its emissions tests has already resulted in a dramatic plunge in VW’s stock price.  VW also lost its CEO and is facing billions of dollars in fines.

What everyone should learn from VW’s mistake is that when dealing with state and federal laws, you don’t want to swindle your way into compliance.  It is important to consult with a lawyer to make sure that your business practices are in conformity with applicable laws and regulations.  Even if you are not intentionally breaking the law, you may still be inadvertently in violation of a law and/or regulation, thereby  putting you at risk of civil and criminal liability.

In VW’s case, under the Clean Air Act (the federal law designed to control air pollution), each violation may result in up to a $37,500 fine.  VW is suspected of having more than 400,000 violations. A $37,500 fine multiplied by 400,000 violations results in over $15 billion in potential fines being faced by VW simply by cheating on its emissions tests.

This isn’t the first time a car company has been fined by US regulators. Last year General Motors (GM) was facing civil and criminal penalties for installing faulty ignition switches in over 2.6 million vehicles.  However, GM reached a $900 million settlement with US officials.  The main difference between GM’s liability and VW’s potential liability is that VW’s cheating devices did not cause any deaths, whereas GM’s faulty ignition switches did.  That doesn’t mean that there won’t be suits filed.  A recent survey by Big Law Business of the nation’s court dockets identified that twenty federal lawsuits have already been filed against VW based on the diesel scandal.   As of the date of this posting there have not been any settlements by VW so it is still too early to predict how the VW scandal will resolve.  However, companies certainly can learn from the VW scandal that it simply does not pay to cheat on compliance with federal and state laws and regulations.

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