Volkswagen faces legal trouble over emissions scandal

German prosecutors launched an investigation on Monday into former Volkswagen boss Martin Winterkorn over the rigging of vehicle emissions tests, as the carmaker suspended three top engineers in an attempt to tackle the crisis.

The investigation into Winterkorn, who quit on Wednesday after almost nine years at the helm of Europe's largest carmaker, is over “allegations of fraud in the sale of cars with manipulated emissions data,” the prosecutor's office said.

Volkswagen, which has admitted to cheating diesel emissions tests in the United States, is under huge pressure to get to grips with the biggest business scandal in its 78-year history.

It named company veteran Matthias Mueller on Friday as chief executive and agreed to appoint a U.S. law firm to conduct a full investigation.

Sources familiar with the matter said on Monday it had also suspended the heads of research and development at its core VW brand, luxury division Audi and sports car maker Porsche.

But the crisis shows no sign of dying down.

Two German newspapers said on Sunday Volkswagen's own staff and one of its suppliers had warned years ago about the illegal use of so-called “defeat devices” to detect when a car was being tested and alter the running of its diesel engine to conceal their emissions of toxic nitrogen oxides.

Bild am Sonntag said VW's internal investigation has found a 2007 letter from parts supplier Bosch warning Volkswagen not to use the software during regular operation. Frankfurter Allgemeine Sonntagszeitung said a Volkswagen technician raised concerns about illegal practices in connection with emissions levels in 2011.

A Volkswagen spokesman declined to comment on the reports.

Legal experts say the German automaker is likely to face significant legal problems, including potential criminal charges, arising from its admission that 11 million of its diesel vehicles sold worldwide contained software specifically designed to help cheat emissions tests.

The Clean Air Act allows for fines of up to $37,500 for each of the 482,000 suspect VWs sold in the United States, potentially totaling more than $18 billion. Attorneys general for nearly 30 states and the District of Columbia have announced a coordinated investigation and said they are issuing subpoenas for company records.

There's also a high likelihood of class-action lawsuits by angry VW owners.

“They're facing a tsunami of possible state and federal enforcement actions, and a potential large number of violations — including administrative, civil and criminal,” said William Carter, a former federal prosecutor in Los Angeles who specialized in environmental crimes and served as general counsel of the California Environmental Protection Agency.

Investigators will almost certainly look for any false statements made to the EPA and for signs that VW has tried to conceal wrongdoing or obstruct regulators. Fraud charges could be considered if evidence emerges that company executives used the Internet or the mail system to carry out the deception. And money laundering allegations will be explored if investigators suspect that VW sent illicit proceeds overseas.

“If a software package such as this were intentionally designed to defeat the emissions testing, there may well be email traffic, meetings, records that would establish that intent,” said Gregory Linsin, a former environmental crimes prosecutor at the Justice Department.

The problems at VW come as the Justice Department faces growing pressure to prosecute individual executives and employees for corporate misdeeds. The last two major criminal investigations against auto companies — Toyota and General Motors— yielded massive fines over car safety problems but have resulted in no prosecutions of executives. Those outcomes dismayed consumer watchdog groups and grieving victims' relatives, who demanded better accountability for failure to disclose vehicle defects.

In the meantime, other carmakers may use more fuel than originally disclosed due to use of the same software as Volkswagen, perhaps indicating a wider industry problem.

Audi on Monday said 2.1 million cars worldwide were fitted with the software that allowed parent Volkswagen to cheat U.S. emission tests.

Some 1.42 million Audi vehicles with so-called EU5 engines are affected in Western Europe, with 577,000 in Germany and almost 13,000 in the United States, a spokesman for Ingolstadt-based Audi said on Monday. Affected model lines include the A1, A3, A4, A5, A6, TT, Q3 and Q5, the spokesman said.

In addition, environmental campaign group Transport & Environment (T&E) published new data on Monday showing that some new Mercedes, BMW and Peugeot cars use 50 percent more fuel than laboratory tests show, saying this was evidence of a wider industry problem.

T&E, which works closely with the European Commission, said its data did not prove other firms were using defeat devices.

But it said the gap between lab results and road performance had grown to such an extent for emissions of both carbon dioxide and nitrogen oxides that further investigation was needed to discover what carmakers were doing to mask emissions.

“The Volkswagen scandal was just the tip of the iceberg,” said Greg Archer, clean vehicles manager at T&E, adding the gap between lab tests and real-world performance cost a typical driver $504 per year.

Wire services