3 US states to sue VW despite $15.3 bn settlement offer

The state of Maryland is joining New York and Massachusetts in a legal action against Volkswagen, Audi and Porsche over diesel emissions cheating.

The lawsuits, announced Tuesday, allege the German automaker and its affiliates broke state environmental laws by selling vehicles equipped with software that concealed true emissions in order to pass government tests.

The suits seek ''substantial penalties'' based partially on a calculation of the duration of the alleged violations.

VW agreed last month to spend up to $15.3 billion to settle other consumer and government claims. But the attorneys general of New York and Massachusetts say that did not resolve claims regarding state environmental laws.

In a statement, Volkswagen says it is ''regrettable'' that states are suing while it is in talks with US federal and state authorities about a national resolution over the emissions scandal.

New York state and Massachusetts announced lawsuits earlier on Tuesday. They allege that Volkswagen and its affiliates defrauded buyers by selling more than 40,000 vehicles in the two states that were equipped with software that concealed the true level of emissions in order to pass government tests.

VW says in a statement that the allegations are ''essentially not new''. It says it has been addressing them in discussions with the US Department of Justice, the Environmental Protection Agency and the California Air Resources Board. The company says it hopes for a comprehensive national resolution of all remaining issues.

The legal action seeks ''substantial penalties'' that would be based on a calculation of the duration of the alleged violations.

The lawsuits come after the German automaker agreed to spend up to $15.3 billion to settle other consumer and government claims. The attorneys general of New York and Massachusetts argue that did not resolve claims regarding violating state environmental laws and did not cover all the affected vehicles.

Further, the suit says the German automaker submitted false documents to the two states as part of an effort to conceal the cheating.

New York attorney general Eric Schneiderman says the lawsuits expose ''a culture of deeply rooted arrogance'' and should serve as a warning to other companies that illegality will not be tolerated.

The suits include claims that former VW chief executive officer Martin Winterkorn and other top company executives orchestrated an elaborate cover-up when the scam came to light, Schneiderman said. New York's complaint was filed Tuesday in state court in Albany, the attorney general said.

''This was a widespread conspiracy involving many, many people,'' Schneiderman said at a press conference. ''The top brass knew'' they were in violation of state and federal laws, he said.

Settlement not enough
VW's legal woes are far from over, as evidenced by the states' suits and ongoing criminal probes, despite the $15.3 billion settlement with regulators and customers in June. The German company admitted in September to using so-called defeat devices to systematically rig environmental tests since 2009. The devices hid the fact that its diesel vehicles were emitting far more pollutants than allowed under US law.

Volkswagen wasn't taking the states' claims seriously, which is why the lawsuits were pursued, Maryland attorney general Brian Frosh said at a press conference. Penalties against the company might run into the hundreds of billions of dollars, he said.

The allegations ''reveal a culture of deeply rooted corporate arrogance, combined with a conscious disregard for the rule of law or the protection of public health and the environment,'' Schneiderman said. ''Substantial penalties must be imposed on the Volkswagen companies, above and beyond the amount they have to pay to make American consumers whole.''

The suit names VW's Audi and Porsche units, as well as their US divisions. According to the complaint, numerous VW employees destroyed incriminating evidence after they were tipped off by a senior in-house lawyer in Germany and then repeatedly failed to disclose to regulators the true reason for the discrepancies.

VW is cooperating with the US Department of Justice, the Environmental Protection Agency and the California Air Resources Board on a "national resolution" of all remaining environmental issues, Jeannine Ginivan, a spokeswoman for the carmaker, said in a statement.

Regrettable: VW
"It is regrettable that some states have decided to sue for environmental claims now, notwithstanding their prior support of this ongoing federal-state collaborative process," Ginivan said.

There were six variations of the defeat device installed by VW and Audi starting in 2008, with Porsche implementing them later, according to Schneiderman's office. VW used the devices even after the EPA began looking into the software to determine its purpose, according to the complaint.

''Volkswagen, Audi and Porsche defrauded thousands of Massachusetts consumers, polluted our air and damaged our environment, and then, to make matters worse, plotted a massive cover-up to mislead environmental regulators,'' the state's attorney general, Maura Healey, said in a statement.

''Clean and green'' was the centre of the companies' false-marketing efforts, including a Super Bowl ad highlighting the vehicles' environmental friendliness, in one of the most-watched television commercials in the US, Schneiderman said. He called the scam ''appalling.''

Sham Recalls
VW tried to cover up the problem through sham recalls that the company knew wouldn't meet the required standards and then only confessed to the defeat devices ''when they knew the regulators had the goods on them,''  Schneiderman's statement said.

Schneiderman's press conference included a blow-up poster of an internal email from Mark Gillies, a spokesman for VW in the US to Oliver Schmidt, director of VW's environmental and engineering office in August of 2004.

''[Audi's] V6 has exactly the same issue [as VW diesels], but not public yet. They have not been caught,'' the email read.

''These actions highlight how stubborn and unrepentant the culture at Volkswagen is that gave rise to the systematic cheating and deception described in this complaint,'' New York says in the complaint.

VW also faces lawsuits by investors in the US, as well as parallel suits, including consumer complaints, in Germany. Future expenses will include perhaps hundreds of millions of dollars in fees for the lawyers who secured the deal for car owners. More penalties, along with further damage to VW's reputation, may yet spring from criminal probes in the US, Germany and South Korea.