DOJ Sues Volkswagen over Dieselgate

The Justice Department filed a complaint against Volkswagen in Detroit on Monday, according to media reports. The lawsuit accuses the auto manufacturer of violating the Clean Air Act by defeating emissions testing in diesel-powered vehicles. This scandal broke last year and led Volkswagen CEO Martin Winterkorn to resign.

It has already been an interesting case – even before the filing of the lawsuit. In response to the allegations, the company put out a public call for information from whistleblowers. This is one of the first times we have seen that happen and it would be interesting to see what, if any, the company received that it wasn’t already aware of before its request. It would also be interesting to hear if any of those internal whistleblowers subsequently faced retaliation.

It would have been even more interesting if a whistleblower had filed a False Claims Act case against the company prior to the public revelation of the allegations. Under a theory of the False Claims Act, the Clean Air Act fines could be obligations owed to the federal government and the information from the defeat device false statements designed to avoid those obligations. If it had been filed it could have been a monster case.

The Wall Street Journal published an article today concerning the potential fine from the lawsuit, and concluded that the company is subject to a bigger fine than previously expected. Prior estimates had put the number at approximately $18 billion. Analysis of the lawsuit by the media put the potential claims at just over $45 billion instead.

Nevertheless, the lawsuit is the latest in a series of missteps by automobile manufacturers in their compliance with U.S. regulations. Toyota and GM, as well as other companies to a lesser extent, have already received large fines for violations regarding safety recalls.

As part of attempts by Congress to clean up the industry, there is a whistleblower law pending in the House – it has already been passed by the Senate. The bill would authorize the Secretary of Transportation to award auto industry whistleblowers with monetary payments for information about safety issues leading to sanctions over $1 million.

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