Herring announces settlement with Volkswagen over emissions fraud

economic-forecast-headerThe Commonwealth of Virginia will receive more than $100 million and qualified Virginia VW owners will receive tens of millions more in direct compensation under the terms of a settlement addressing Volkswagen’s illegal modification of the emissions systems of certain vehicles and violations of  state laws prohibiting unfair or deceptive trade practices.

As part of the settlement,VW will fix affected vehicles, provide millions in compensation directly to the owners of the more than 20,000 affected VW and Audi vehicles bought or leased in Virginia, compensate the state for violations of consumer protection laws, and establish a trust fund for use on projects to improve the environment by reducing air pollution in the transportation sector. Volkswagen has acknowledged equipping certain vehicles with illegal and undisclosed software designed to skirt emissions laws, and the company will be explicitly barred from engaging in future unfair or deceptive acts and practices in connection with its dealings with consumers and regulators.

“This is a really important day for Virginians, especially the owners of the 20,000 affected vehicles sold or leased in Virginia,” said Attorney General Mark Herring. “This settlement is going to provide millions in restitution directly to the customers who were harmed, and it’s going to give our state some important tools to improve Virginia’s environment by cleaning up our transportation system and reducing air pollution. The compensation in this case is extraordinary, but so was the scale and brazenness of VW’s violations. This settlement sends a clear message that we are on duty and on guard to defend the rights of Virginians when businesses try to lie, or cheat, or falsely market their products.”

Under the settlements, Volkswagen is required to implement a restitution and recall program for more than 475,000 owners and lessees of 2.0-liter diesel vehicles, of the model year 2009 through 2015 listed in the chart below at a maximum cost of just over $10 billion. This includes approximately 20,000 vehicles sold or leased in Virginia.

Once the consumer program is approved by the court, affected Volkswagen owners will:

Receive restitution payment of at least $5,100; and,

A choice between:

A buy back of the vehicle (based on pre-scandal NADA value); or

A modification/repair to reduce NOx emissions, provided that Volkswagen can develop a modification that is acceptable to regulators. If regulators do not approve a fix for the vehicles, owners will still be eligible to choose a buyback. Owners who choose the modification option would also receive an Extended Emission Warranty; and a Lemon Law-type remedy to protect against the possibility that the modification causes subsequent problems.

The consumer program also provides benefits and restitution for lessees, including partial restitution and a no-penalty lease termination option, and sellers after September 18, 2015 when the emissions-cheating scandal was disclosed.

In addition to compensation directly to VW owners, other components of today’s settlements include:

Environmental Mitigation Fund: Volkswagen will pay $2.7 billion into a trust to support environmental programs throughout the country to reduce emissions of NOx. This fund, also subject to court approval, is intended to mitigate the total, lifetime excess NOx emissions from the 2.0-liter diesel vehicles identified below. Under the terms of the mitigation trust, Virginia is eligible to receive more than $87 million to fund environmental improvement and air pollution reduction projects.

Additional Payment to the States: In addition to consumer restitution, Volkswagen will pay to the states more than $1,000 per car for repeated violations of state consumer protection laws, amounting to $570 million nationwide.  This amount includes $20 million paid to the Commonwealth for affected vehicles Volkswagen sold and leased in Virginia.

Zero Emission Vehicles: Volkswagen has committed to investing $2 billion over the next 10 years for the development of non-polluting cars, or Zero Emission Vehicles (ZEV), and supporting infrastructure.

Preservation of Environmental Claims: Today’s settlement by state attorneys general preserves all claims under state environmental laws, and Virginia maintains the right to seek additional penalties from Volkswagen for its violations of environmental and emissions laws and regulations.

Volkswagen will also pay $20 million to the states for their costs in investigating this matter and to establish a fund that state attorneys general can utilize for future training and initiatives, including investigations concerning emissions violations, automobile compliance, and consumer protection.

The coordinated settlements resolve consumer protection claims raised by a multistate coalition of state Attorneys General against Volkswagen AG, Audi AG, and Volkswagen Group of America, Inc., Porsche AG and Porsche Cars, North America, Inc. – collectively referred to as Volkswagen. They also resolve actions against Volkswagen brought by the United States Environmental Protection Agency (EPA) and Department of Justice (DOJ), the Federal Trade Commission (FTC), California and car owners in private class action suits.

The attorneys generals’ investigation confirmed that Volkswagen sold more than 570,000 2.0- and 3.0-liter diesel vehicles in the United States equipped with “defeat device” software intended to cheat emissions tests, and actively concealed the existence of the modification from regulators and the public. Volkswagen made false statements to consumers in their marketing and advertising, misrepresenting the cars as environmentally friendly or “green” and that the cars were compliant with federal and state emissions standards, when, in fact, Volkswagen knew the vehicles emitted harmful oxides of nitrogen (NOx) at rates many times higher than the law permitted.

The full details of the consumer program will be available online at www.VWCourtSettlement.comand www.ftc.gov/VWSettlement.

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