Volkswagen Scandal Widens to Include Audi Emissions Software and Investigation of Chairman
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Volkswagen Scandal Widens to Include Audi Emissions Software and Investigation of Chairman

Software allowed certain Audi vehicles to cheat on carbon dioxide emissions test

November 7, 2016

Laboratory tests conducted by the California Air Resources Board (CARB) have revealed that Volkswagen (VW) installed software on certain Audi models apparently designed to cheat on carbon dioxide emissions tests.

Different Emissions, Same Goal

Although The Wall Street Journal (WSJ) reports that the software is different from that installed in other Volkswagen, it seems likely that most people will link the software to the scandal that erupted last year because in both instances the company was trying to cheat emissions standards. The difference is that the software installed in Audi vehicles was designed to cover up carbon dioxide emissions rather than nitrogen oxides, or smog.

The software was found four months ago by the CARB during laboratory testing. The discovery has not yet been publicly disclosed by either the company or federal regulators.

As a result of last year's scandal, VW was forced to recall almost 500,000 vehicles in the U.S. and nine million in Europe and was fined billions of dollars. It is not known what the legal consequences to the company will be, if any, from this latest discovery, writes WSJ: "It isn't clear how seriously officials in California and federal officials in Washington view the latest discovery, or whether Volkswagen, under intense regulatory scrutiny around the world, had identified it privately to regulators."

However, the company will probably face fresh anger from vehicle owners, company owners, and investors. The New York Times (NYT) speculates that there may be particular anger over the fact that the company is still being run by people who were in charge when the deceptive software programs were installed. Volkswagen had just been on the point of finishing all the settlements and recalls when the new discovery came to light.

The company's previously-disclosed "defeat device" software was installed on diesel engines in VW and Audi vehicles to make it look like they were in compliance with nitrogen oxide emissions standards during laboratory tests. The newly-found software, which was installed on both diesel and gasoline-fueled Audi models, performed the same function for carbon dioxide emissions standards in both the U.S. and Europe.

According to U.S. News and World Report, Audi stopped using the software just before it was discovered, and VW suspended numerous engineers connected to the program. WSJ writes that the CARB technicians who found the software did so by putting into action the lessons they learned from last year's scandal. They turned the steering wheel to make the vehicle react as if it were on a road. The vehicles' carbon dioxide emissions rose drastically when the vehicles were no longer operating under laboratory conditions.

Volkswagen Under Fire

The discovery comes at a particularly bad time for VW. The company recently announced that a criminal investigation currently being conducted in Germany into last year's scandal has now broadened to include the beleaguered company's chairman, Hans Dieter Pötsch. The investigators claim that VW's management intentionally did not notify its shareholders about the U.S. investigation and the financial risks possible as a result.

VW stated that it has not found any evidence that its management did not promptly notify investors.

Pötsch because chairman in September 2015 during a re-organization of company management in the wake of the diesel scandal. He previously served as finance chief and was responsible for the company's communications with financial markets. According to NPR, his tenure as chief financial officer took place from 2003 through 2015, which includes the period during which VW developed and installed the deceptive software. NYT reports that he oversees the company's management board as one of his responsibilities as chairman of the supervisory board.

It is unclear, writes WSJ, which Audi vehicles may have the newly-found software. This uncertainty may bring up new questions in Europe, which has more stringent regulations on greenhouse gas emissions than on nitrogen oxides.

Global Repurcussions

The company insists that its software programs did not violate European law, and it has not been charged with violating the law in Germany. Criminal investigations and civil lawsuits instead are focusing on whether or not VW management violated securities law or committed fraud and should be held liable for resultant damages experienced by consumers and investors.

U.S. News and World Report writes that VW is facing criminal charges in South Korea, however, where one manager has been arrested and imprisoned and where Frank Thammer, CEO of the company's Korea location, has had his passport confiscated.

"The company reaffirms its belief that the Volkswagen board of management duly fulfilled its disclosure obligation under German capital markets law," the company stated. It added that both it and Pötsch "will continue to give the inquiries by the public prosecutor's office their full support."