[T]he state of Vermont is suing Volkswagen and its subsidiaries, claiming the car company committed a massive fraud, broke environmental laws and that a proposed settlement of $3 million offered in June to address consumer complaints was “wholly inadequate.”
Attorney General Bill Sorrell held a press conference Thursday to announce the lawsuit in Vermont Superior Court and condemn the company for conducting “a massive and intentional fraud” when it advertised “clean” and “green” vehicles to Vermonters.
The company admitted in September 2015 that it advertised cars as clean diesel but in fact built them with equipment called “defeat devices” designed to cheat on emissions tests. The company also allegedly manipulated the cars’ diagnostic equipment to conceal those defeat devices.
Approximately 3,400 affected Volkswagens, Audis, and Porches with 2-liter and 3-liter engines are registered in Vermont, Sorrell said. That’s the second-highest number of affected cars per capita of all the states in the country, behind Oregon.
A spokesperson for the company said in a statement: “Volkswagen is committed to reaching a fair and efficient resolution of remaining federal and state diesel claims in the United States.”
“We have received Vermont’s complaint, and will respond appropriately,” the spokesperson said.
Sorrell said Vermont is serious about its complaint.
“This was not a mistake,” he said. “This was not a ‘whoops’ situation. This was intentional fraud on a massive scale. We look forward to our day in court and to prove their liability, prove how we’ve been harmed in the state, and see that justice is done.”
Vermont’s case alleges an extensive coverup that was openly discussed the company’s executives and charges the company and its subsidiaries with nine violations of state law, including Vermont’s clean air laws and the Vermont Consumer Protection Act.
Filing the lawsuit means that Vermont has rejected $2.9 million that the company offered if the state agreed not to sue under the Consumer Protection Act. Sorrell said he is not seeking a specific amount of money, but there could be thousands or hundreds of thousands of violations, which each carry a fine of $10,000.
“With all due respect to those state and federal officials who negotiated the proposed national settlement, we just find the consumer protection arena inadequate,” Sorrell said. “We think the nature of the conduct, the impact on Vermonters, the amount of advertising—the false advertising—in Vermont, deserves stiffer penalties.”
While some states have sued for either consumer protection or environmental issues, the lawsuit makes Vermont just the second state to sue Volkswagen under both its consumer protection laws and environmental laws. The other state is New Jersey, which sued in February.
Vermont has always retained the right to sue Volkswagen under its own clean air laws, Sorrell said, because Vermont has a federal legal designation as a state with more-stringent environmental standards than the U.S. Environmental Protection Agency.
Filing the lawsuit under Vermont’s clean air laws also does not affect the state’s ability to accept up to $17.8 million from a separate environmental settlement, which was set up as a federally managed trust fund for states to use for specific emission-reduction purposes.
Deb Markowitz, the secretary of the Agency of Natural Resources, said the federal government negotiated that environmental settlement with big cities in mind, but Vermont wanted changes because it also gets diesel emissions from sawmills and farm equipment.
Even though Vermont gets diesel emissions from different sources, she praised residents for choosing to drive clean cars, and she said their choice to drive clean cars helps the state meet regulations from the Environmental Protection Agency.
“We rely on the laws that we have in place that hold our auto manufacturers accountable to standards,” Markowitz said. “We rely on that. And when we find that there is a fraud that has been committed, it really matters for Vermont.”
“We are still in attainment of all of the air standards that the EPA sets for the state, but year to year, we get close to that attainment level,” she said. “It matters what people are driving.”
Alleged 17-month coverup
Sorrell alleges that Volkswagen’s top executives openly discussed the existence of “defeat devices,” often calling them “acoustic functions,” but kept information from federal regulators when asked about certain irregularities.
The devices were in several different models of vehicles, known as Generation 1, 2, and 3, according to the lawsuit, but federal regulators started to catch on to emissions problems when the company sought approval for Generation 3 vehicles.
At that point, according to the lawsuit, the company’s head of quality assurance, Frank Tuch, wrote in a letter: “A thorough explanation for the dramatic increase in NOx emissions cannot be given to the authorities.”
“It can be assumed that the authorities will then investigate the VW systems to determine whether Volkswagen implemented a test detection system in the engine control unit software (so-called defeat device),” the letter said.
The attorney general writes: “With the risks of detection in mind, defendants embarked on a strategy to deflect scrutiny. Defendants publicly denied that the unlawful vehicles failed emissions requirements. They neutrally acknowledged the existence of the problem without explaining its known cause to authorities.”
The company then started “covertly managing” the issue in the Generation 3 issue, while “attempting to downplay the scope and severity of the problems” with Generations 1 and 2 by issuing “sham software recalls” on those older vehicles, according to the lawsuit.
Sorrell says the dual strategy “to mislead and confuse regulators and the public about the fact that their installation of the defeat devices was the true cause of the high real-driving NOx emissions” lasted for 17 months, until September 2015, when the company admitted the violations.
The attorney general says that, even when Volkswagen admitted problems in vehicles with 2-liter engines, the company “continued to deny the existence of defeat devices” in cars with 3-liter engines. The Environmental Protection Agency revealed those issues in November.
Allegedly deceptive advertisements
The Vermont lawsuit identifies an extensive list of individual advertisements that Volkswagen used to sell the TDI Clean Diesel cars, and even targets window stickers that were put on new cars as individual violations of the Consumer Protection Act.
One ad campaign said the notion that diesel was dirty and noxious was an “old wives’ tale.” Other taglines included “Diesel has really cleaned up its act” and “Diesel, it’s no longer a dirty word.”
“From 2009 through 2015, defendants spent hundreds of millions of dollars to develop and place Internet, television and print advertisements that highlighted the fuel efficiency, performance, and environmental hygiene of the unlawful vehicles,” the lawsuit says.
The lawsuit says that the ad campaign calling dirty diesel an “old wives tale” received more than 9.9 million views, 13.5 million impressions on Tumblr, and more than 5 million impressions on Twitter. “Within just six hours of posting, the ‘dirty’ video alone got over 80,000 views,” the lawsuit says.
The lawsuit identifies ads that ran during “multiple Super Bowls,” misleading press releases that described those advertisements to reporters, and marketing brochures full of “misstatements about the effectiveness of the emissions control systems.”
The lawsuit says the window stickers placed on each affected diesel vehicle in Vermont identified average “smog ratings” when the NOx emissions “actually exceeded applicable standards by up to 40 times.”
