A longtime Volkswagen engineer from Southern California pleaded guilty in federal court to charges he helped design and implement a software system that enabled the German automaker’s diesel engines to defeat emissions tests.

The plea is the first from a staffer involved in the cheating scandal, and it signals that the Justice Department is serious about holding Volkswagen employees personally and criminally responsible for producing about half a million cars that spew up to 40 times the legally allowed amount of pollutants into the atmosphere.

James Robert Liang, 62, a Newbury Park resident, pleaded guilty in federal court in Detroit to a single charge of conspiring to defraud the United States, commit wire fraud and violate the Clean Air Act. He faces up to five years in prison and a $250,000 fine.

“Today’s charges are the first shoe to drop in the Volkswagen criminal case, but certainly not the last,” said David Uhlmann, a law professor at the University of Michigan and former chief of the Justice Department’s environmental crimes section. “The open question is whether the evidence will allow prosecutors to charge senior executives at Volkswagen.”

Advertisement

Neither Liang nor his attorney could be reached for comment.

Public records link Liang to a single-story, four-bedroom home in a gated community in the hills of Thousand Oaks.

On Friday, the shutters on street-facing windows were pulled down tight. A silver four-door Volkswagen sat in the driveway, while another silver Volkswagen car was parked on the street, directly in front of the home.

As part of the plea agreement, Liang will cooperate with the government in its ongoing criminal investigation, the U.S. Department of Justice said in a statement. Such cooperation is generally a sign that federal prosecutors are seeking to charge others in a scheme.

Advertisement

The plea agreement describes a conspiracy that spanned nearly a decade.

Liang had worked in Volkswagen’s diesel development department in Wolfsburg, Germany, starting in 1983. In 2006, he and his “co-conspirators” started work on a new diesel engine for U.S. vehicles, the plea agreement says.

As described in a 25-page indictment unsealed Friday along with the plea deal, Liang and the other VW employees at Volkswagen knew “from almost the beginning of VW’s process to design its new ‘clean diesel’ vehicles” that the cars “would not meet U.S. emissions standards.”

When they realized that they could not design an engine that would adhere to the strict U.S. standards, while also delivering solid road performance, they created and implemented so-called defeat devices — software that could recognize when cars were being tested “in order to cheat” the tests, according to court papers.

If the software detected the vehicle was undergoing a test, it told the car to emit only enough nitrogen oxide to pass the inspection. Otherwise, the court papers allege, it permitted the cars to pump substantially more nitrogen oxide into the atmosphere.

In a statement released Friday, the Justice Department said Liang admitted to using the software while working on the diesel engine and “assisted in making the defeat device work.”

Volkswagen said in a statement that it is “continuing to cooperate with the U.S. Department of Justice,” but couldn’t comment on the indictment.

In 2008, Liang transferred to the U.S. to help launch Volkswagen’s new “clean diesel” vehicles, according to the plea agreement. While working at VW’s test facility in Oxnard, he served as “leader of diesel competence.”

Advertisement

According to the plea agreement, Liang said he and his co-conspirators “misrepresented” that the VW diesel vehicles met U.S. emissions standards during certification meetings for new cars with the U.S. Environmental Protection Agency and the California Air Resources Board and “hid the existence of the defeat device from regulators.”

According to court papers, Liang and his fellow engineers did not stop at creating the defeat devices — they improved them.

As the engines aged, Volkswagen noticed increasing complaints about parts and components breaking down.

Engineers believed that the surge in warranty claims was “a result of the vehicle operating in ‘testing mode’ too long rather than switching to ‘road mode,’ ” prosecutors wrote.

To blunt the claims, Liang and his fellow employees upgraded the defeat device to help cars better recognize when they no longer were being tested. Volkswagen then pushed the software update out to unwitting customers, claiming that it was intended to improve their cars and never mentioning that it was partly to cheat emissions tests.

Liang and his co-conspirators continued to lie to the EPA and state Air Resources Board, even after regulatory agencies started to raise questions about the vehicles’ performance, the plea agreement says.

The scandal erupted last September when the Air Resources Board and the EPA said they had discovered the software in certain 2-liter VW diesel vehicles. In regular driving, they said, the vehicles spew up to 40 times the legally allowed amount of nitrogen oxide.

Regulators later said the defeat devices also were installed in some Volkswagen and Audi 3.0-liter diesel vehicles as well.

Advertisement

Volkswagen in June agreed to pay up to $14.7 billion to settle government allegations in the U.S. linked to its cheating on emissions tests and to buy back or terminate the leases of nearly half a million of its cars.

The German automaker will spend up to $10 billion to buy back or modify VW and Audi 2.0-liter diesel vehicles in the U.S. It also will pay $2.7 billion into a trust to support environmental programs and reduce emissions. The settlement was reached with the Justice Department, state attorneys general and other agencies, as well as car owners.

The agreements represented the largest settlement in U.S. history with an automaker.

samantha.masunaga@latimes.com

del.wilber@latimes.com

Times staff writer Neal J. Leitereg contributed to this report.

UPDATES:

11:30 a.m.: This article was updated with additional information about the indictment.

10 a.m.: This article was updated with additional information about the plea agreement.

8:55 a.m.: This article was updated throughout with staff reporting.

This article was originally published at 8:20 a.m.</s>A veteran Volkswagen engineer has become the first person to be criminally charged over the diesel emissions scandal, in a move that opens the door to possible charges against other employees.

James Liang, a VW employee for 25 years, pleaded guilty to conspiring to defraud US customers and regulators and agreed to co-operate with federal prosecutors investigating the carmaker’s conduct.

The engineer at VW’s facility in Wolfsburg, Germany, admitted to helping develop the cheating software that masks vehicles’ emission levels while in test conditions.

Last September VW admitted that 11 million cars – including 110,000 in Ireland – contained the software, sparking investigations and lawsuits across the world that have cost the carmaker billions of dollars and tarnished its reputation.

On Friday Mr Liang (62) pleaded guilty to a charge of conspiracy to commit wire fraud and violate the Clean Air Act. His involvement raises the possibility that criminal charges may be brought against other employees at the German carmaker.

VW, which is also under criminal investigation but has not yet faced charges, said: “Volkswagen is continuing to co-operate with the US department of justice. We cannot comment on this indictment.”

Since the scandal emerged a year ago, questions over whether senior executives knew of the deception have gone unanswered.

A plea agreement with prosecutors stated that, even as VW billed its cars as “clean diesel”, Mr Liang and other company employees “knew that these representations to US customers were false and that VW’s diesel vehicles were not clean”.

Mr Liang personally participated in a VW conspiracy to outwit US emissions rules governing 500,000 VW diesel 2.0 litre passenger cars, according to his plea agreement, which describes meetings attended by company officials and US environmental officials in 2007.

During those sessions, “Liang participated as his co-conspirators misrepresented that VW diesel vehicles complied with US” emissions rules, the document stated.

Mr Liang was a key part of VW’s efforts to quell regulators’ concerns about the vehicles following a 2014 study that identified discrepancies between the cars’ emissions in lab tests compared with their actual road performance.

He was part of the original engineering team that built the EA 189 engine in Germany, but he was also in the US when California regulators began asking detailed questions about emissions. “He was in the wrong place twice,” a person familiar with Mr Liang’s case said.

Mr Liang moved to the US in 2008 to work in VW’s Oxnard, California facility.

According to a US court filing from June, but only released to the public on Friday, Mr Liang and unnamed co-conspirators actively concealed information about the existence of defeat devices for cars with model years from 2008 to 2016.

In March 2014, when a West Virginia University study raised questions about the real world emissions of some VW cars, Mr Liang “pursued a strategy to disclose as little as possible” about the illegal software.

He “intentionally made... false and fraudulent statements” to the EPA and CARB to make the discrepancies appear as if they were innocent mechanical and technological problems, the legal filing said.

When VW recalled half a million cars in early 2015 to “fix” the emissions problem, Mr Liang allegedly knew the recall would not work.

VW has already set aside €18 billion to cover the costs of the scandal.

Stuart Pearson, an analyst at Exane BNP Paribas, estimated VW could be fined $2.25 billion if it faced criminal charges over the issue.

“The maximum fine the DoJ can impose is two times the economic gain or loss from VW’s actions,” he said.

While Exane estimated the cost to VW of not installing the correct emissions reduction technology at the time was about $630 million, Mr Pearson added there could be a “wide interpretation” of the costs the company avoided through its cheating.</s>A longtime Volkswagen engineer has pleaded guilty to one count of conspiracy for his role in the German automaker’s global emissions cheating scandal.

James Robert Liang, 62, a Newbury Park, Calif. resident, entered his plea Friday. Though he was indicted under seal on June 1 by a federal grand jury, the indictment was unsealed Friday. The case is assigned to U.S. District Judge Sean Cox of the Eastern District of Michigan.

As part of the plea agreement, Liang will cooperate with the government as part of its ongoing investigation, the U.S. Department of Justice said in a statement.

Volkswagen said in a statement that it is “continuing to cooperate with the U.S. Department of Justice,” but couldn't comment on the indictment.

Liang was indicted on one count of conspiracy to defraud the U.S. government, to commit wire fraud and to violate the Clean Air Act. According to the plea agreement, after he and his “co-co-conspirators” realized they couldn’t design a diesel engine that met strict U.S. regulations, they designed and implemented so-called “defeat devices” that would recognize when vehicles were being tested.

For more business news, follow me @smasunaga

8:55 a.m.: This article was updated throughout with staff reporting.

This article was originally published at 8:20 a.m.</s>DETROIT (AP) - A Volkswagen engineer has pleaded guilty to one count of conspiracy in the company’s emissions-cheating scandal and has agreed to cooperate in the widening criminal investigation.

James Robert Liang, 62, of Newberry Park, California, entered the plea Friday in U.S. District Court in Detroit to one count of conspiracy to defraud the government through wire fraud.

Volkswagen has admitted to installing software on about 500,000 2-liter diesel engines in VW and Audi models in the U.S. that turned pollution controls on during government tests and turned them off while on the road. The Environmental Protection Agency found that the cars emitted up to 40 times the legal limit for nitrogen oxide, which can cause human respiratory problems.

Liang was indicted in June on one count of conspiracy to commit wire fraud and another count of violating the Clean Air Act. He allegedly helped design the computer software that cheated on diesel-emissions tests. The indictment alleges Liang and unnamed co-conspirators resorted to using the cheating software after realizing the cars couldn’t both meet consumer expectations for performance and satisfy U.S. emissions standards.

Liang pleaded guilty to the conspiracy charge Friday morning before Judge Sean Cox. He will be sentenced on Jan. 11. The judge said that sentencing guidelines call for Liang to serve five years in prison.

The cooperation of Liang, who began work in Wolfsburg, Germany, and also worked in the U.S., is a major breakthrough in the Justice Department’s investigation into the automaker’s cheating scandal. His cooperation could lead to other criminal charges against VW and the unidentified co-conspirators.</s>WASHINGTON, Sept 9 (Reuters) - The U.S. Justice Department said a Volkswagen engineer has been charged as part of its criminal probe into the German automaker's diesel emissions scandal.

The engineer was appearing in U.S. District Court in Detroit on Friday and is expected to enter into a plea agreement that includes his cooperation with the government in its ongoing investigation, a department spokesman said. VW has already agreed to spend up to $16.5 billion to address environmental, state and owner claims in the United States. (Reporting by David Shepardson)</s>A Volkswagen AG engineer pleaded guilty on Friday to helping the German automaker evade US emission standards, becoming the first person US authorities have charged in their investigation.

James Liang, who has worked for VW since 1983 and was part of a team of engineers who developed a diesel engine, was charged in an indictment made public on Friday with conspiring to commit wire fraud and violating US clean air laws.

The 62 year-old German citizen, who lives in Newbury Park, California, appeared in US District Court in Detroit on Friday and entered into a plea agreement that includes his cooperation with the government in its investigation. The indictment says Liang conspired with current and former VW employees to mislead US regulators about the software that allowed the automaker to circumvent the nation’s emission standards.

Liang could face up to five years in prison but could get a much lighter sentence if the government finds he provided substantial assistance.

VW spokeswoman Jeannine Ginivan declined to comment on the indictment. “Volkswagen is continuing to cooperate with the U.S. Department of Justice,” she said.

The company has already agreed to spend up to $16.5 billion to address environmental, state and owner claims in the United States. It still faces billions in potential fines and must resolve the fate of 85,000 polluting 3.0-liter vehicles.

Reuters reported in August that VW and the Justice Department had held preliminary settlement talks about resolving a criminal probe into the emissions scandal.

Liang was indicted in June, but the indictment was only made public on Friday.</s>DETROIT (AP) — A Volkswagen engineer has pleaded guilty to one count of conspiracy in the company's emissions cheating scandal, advancing a criminal investigation by agreeing to testify against others.



James Robert Liang, 62, of Newberry Park, California, entered the plea Friday in U.S. District Court in Detroit to one count of conspiracy to defraud the government through wire fraud.



Liang is the first person to enter a plea in the case, and his cooperation is a major breakthrough in the Justice Department's probe into the scandal. Government documents say others were involved and point to multiple emails in German that likely came from VW employees in Wolfsburg, Germany.



Volkswagen has admitted to installing software on about 500,000 2-liter diesel engines in VW and Audi models in the U.S. that turned pollution controls on during government tests and turned them off while on the road. The Environmental Protection Agency found that the cars emitted up to 40 times the legal limit for nitrogen oxide, which can cause human respiratory problems.



Liang, who began work for VW in 1983 in Germany, and also worked in the U.S., was indicted in June on one count of conspiracy to commit wire fraud and another count of violating the Clean Air Act. According to a plea agreement unsealed Friday, Liang admitted that he and others planned software known as a defeat device, that could cheat U.S. emissions tests after recognizing that a diesel engine they were designing could not meet customer expectations and stricter emissions standards. Using the defeat device enabled VW to obtain a certificate from the Environmental Protection Agency needed to sell the cars in the U.S.



Liang pleaded guilty to the conspiracy charge before Judge Sean Cox. He will be sentenced on Jan. 11. The judge said that guidelines call for Liang to serve five years in prison. He also could be fined up to $250,000.



Volkswagen wouldn't comment on the plea but said Friday that it continues to cooperate in the investigation.



Laing, who wore a dark suit and tie, mostly responded "yes" or "no" to the judge's questions at the Friday hearing, but also read a brief statement in which he admitted to the fraud. He had a German-speaking interpreter with him in court but did not use her and gave all responses in English. The judge noted that he is not a U.S. citizen and could be subject to immigration action.



Assistant U.S. Attorney Mark Chutkow told the judge that two or more of Laing's colleagues also had knowledge of the conspiracy.



According to the indictment, Liang and his co-conspirators were tasked with designing new diesel engines for the U.S. market that complied with stricter emissions standards for nitrogen oxide emissions that went into effect in 2007. Within VW, it was referred to as the US '07 project.



Prosecutors say Liang and the other engineers realized that could not design a diesel vehicle that both met the stricter U.S. emission standards and performed well enough to satisfy customers. So they began work on defeat device software that would cheat on the tests, the indictment says.



Within VW, the cheating software was referred to as "cycle beating," or "emissions tight" mode, among other terms, according to the indictment.



In one 2007 meeting with government officials in Ann Arbor, Michigan, Liang participated as his co-conspirators misrepresented that VW's diesel vehicles complied with U.S. emissions standards, according to the plea agreement.



"Liang knew that VW was cheating by implementing the defeat device and that he and his co-conspirators were considering deceiving EPA in this meeting," the plea agreement states.



The indictment says that in May 2008 Liang transferred from Volkswagen headquarters in Germany to the U.S. to help oversee the launch of the new "clean diesel" models. Investigators uncovered internal company emails that show Liang and other VW engineers exchanged ideas about how to "effectively calibrate the defeat device" so that the cars would recognize when they were undergoing U.S. emissions testing. The software was designed to recognize when the cars were being tested on a treadmill-like device called a dynamometer.



In 2013, Liang and others exchanged messages in German about software that recognized when the engine was revving but the steering wheel was not moving, an indication that the car was undergoing a dynamometer test. The software then calibrated the engine to run cleaner than it would in real world driving, according to the indictment.



"If this goes through without problems, the function is probably truly watertight! ;-)" one of the VW employees messaged Liang in German.



The scheme began to unravel in 2014 when a nonprofit group discovered that the cars polluted too much in real-world driving conditions. But prosecutors say that Liang and his VW colleagues still conspired to hide the existence of the defeat devices.



As a first step, VW offered a new "optimized" software update that was supposed to address the high emissions.



"We 'only just need a plausible explanation' as to why the emissions are still high!!!" a VW employee wrote to Liang and others in German after the software patch provided by VW failed to fix the problem.



"We must be sure to prevent the authority from testing the Gen 1!" a VW employee emailed in June 2015, referring to the first generation of VW models using the "clean diesel" engines. The emails said that if Gen 1 is tested by the California Air Resources Board "then we'll have nothing more to laugh about!!!!!"



As the VW engineers struggled to explain to U.S. regulators why their cars kept failing the tests, a VW employee wrote Liang and others in July 2015: "the key word 'creativity' would be helpful here."



____



Eric Tucker and Michael Biesecker in Washington contributed to this report.</s>DETROIT (AP) — A Volkswagen engineer has pleaded guilty to one count of conspiracy in the company's emissions cheating scandal and has agreed to cooperate in the widening criminal investigation.

James Robert Liang, 62, of Newberry Park, California, entered the plea Friday in U.S. District Court in Detroit to one count of conspiracy to defraud the government through wire fraud. Liang is the first person to enter a plea in the emissions-cheating scheme.

Volkswagen has admitted to installing software on about 500,000 2-liter diesel engines in VW and Audi models in the U.S. that turned pollution controls on during government tests and turned them off while on the road. The Environmental Protection Agency found that the cars emitted up to 40 times the legal limit for nitrogen oxide, which can cause human respiratory problems.

Liang was indicted in June on one count of conspiracy to commit wire fraud and another count of violating the Clean Air Act. According to a plea agreement unsealed Friday, Liang admitted that he and others planned a special software function, known as a defeat device, that could cheat U.S. emissions tests after recognizing that a diesel engine they were designing could not meet customer expectations and stricter emissions standards. Using the defeat device enabled VW to obtain a certificate from the Environmental Protection Agency needed to sell the cars in the U.S.

Liang pleaded guilty to the conspiracy charge before Judge Sean Cox. He will be sentenced on Jan. 11. The judge said that sentencing guidelines call for Liang to serve five years in prison.

The cooperation of Liang, who began work in Wolfsburg, Germany, and also worked in the U.S., is a major breakthrough in the Justice Department's investigation into the automaker's cheating scandal. His cooperation could lead to other criminal charges against VW and the unidentified co-conspirators.

Volkswagen wouldn't comment on the plea but said Friday that it continues to cooperate in the investigation.

In one 2007 meeting in Ann Arbor, Michigan, with government officials, Liang participated as his co-conspirators misrepresented that VW's diesel vehicles complied with U.S. emissions standards, according to the plea agreement.

"Liang knew that VW was cheating by implementing the defeat device and that he and his co-conspirators were considering deceiving EPA in this meeting," the plea agreement states.

In May 2008, the indictment says Liang transferred from Volkswagen headquarters in Germany to the U.S. to help oversee the launch of the new "clean diesel" models. Investigators uncovered internal company emails that show Liang and other VW engineers exchanged ideas about how to "effectively calibrate the defeat device" so that the cars would recognize when they were undergoing U.S. emissions testing. The software was designed to recognize when the cars were being tested on a treadmill-like device called a dynamometer.

In 2013, Liang and others exchanged messages in German about software that recognized when the engine was revving but the steering wheel was not moving, an indication that the car was undergoing a dynamometer lab test. The software then calibrated the engine to run cleaner than it would in real world driving, in order to pass the test, according to the indictment.

"If this goes through without problems, the function is probably truly watertight! ;-)" one of the VW employees messaged Liang in German.

Eric Tucker and Michael Biesecker in Washington contributed to this report.</s>A Volkswagen engineer pleaded guilty to U.S. federal charges for his role in the diesel emission cheating scandal.

James Robert Liang, 62, who worked at Volkswagen for more than 30 years, faces up to five years in federal prison. They were the first U.S. criminal charges in the Volkswagen (VLKAF) case, where the company sold about 500,000 cars loaded with software that cut back on pollution during emissions testing. The same cars emitted up to 40 times the allowed level of various pollutants when actually driven.

Liang has agreed to cooperate with the investigation of other Volkswagen employees. He might also have to pay a fine of up to $250,000.

"Volkswagen is continuing to cooperate with the U.S. Department of Justice. We cannot comment on this indictment," said VW spokeswoman Jeannine Ginivan.

Liang, a German citizen, helped to develop the so-called "clean diesel" engine for Volkswagen while working in Germany. According to court documents, he and his co-conspirators realized they could not design a diesel engine that would meet the stricter U.S. emissions standards. So they designed and implemented software to cheat the tests.

In 2008, Liang moved to the United States to help win regulatory approval of the diesel engines. He attended meetings with environmental regulators and answered questions about the engines' test results, knowing that that were false, according to the court documents. He faces being deported once he serves his prison term.

Volkswagen has admitted that its cars contained the illegal software. The company still faces a U.S. criminal probe. Volkswagen says its own probe has determined top executives did not know of the cheating scandal, and that it was the work of lower level employees.

But the attorneys general of New York and Massachusetts have filed a suit accusing top executives of engaging in a "massive fraud" to break environmental laws.

The company also has agreed to pay $15.3 billion in civil penalties to compensate owners of its U.S. diesel cars, including an agreement to fix or buy back the cars.</s>A Volkswagen engineer was indicted in Detroit federal court Friday and pleaded guilty for his role in developing an emissions-cheating device installed on a half-million diesel cars sold in the United States.

James Liang helped develop the diesel engines equipped with illegal emissions test "defeat devices" from the earliest stages, the indictment said.

Liang, 62, is expected to cooperate with US prosecutors developing a criminal case in the Volkswagen scandal, a person close to the case said.

"Almost from the beginning of VW's process to design its new 'clean diesel' vehicles, Liang and his fellow co-conspirators designed these VW diesel vehicles not to meet US emissions standards, but to cheat the testing process by making it appear as if diesel vehicles met US emissions standards when, in fact, they did not," the Justice Department said in a 24-page indictment.

Liang worked on the defeat devices from November 2006 while at Volkswagen headquarters in Wolfsburg, Germany.

He then moved to California for the company in 2008 as Volkswagen ramped up its marketing of its ostensibly "clean diesel" cars with high fuel efficiency in an effort to win greater market share in the US.

Liang and other VW employees developed a complex software system to keep emissions low when a car was undergoing testing to demonstrate environmental compliance, but to allow them to spew higher emissions on the road while boosting fuel efficiency, the indictment said.

Liang and others consistently misrepresented the system to federal and state environmental regulators and lied about the issue when regulators probed the discrepancy between the cars' testing and real-world emissions performance, the indictment said.

"Liang and his co-conspirators attempted to make it appear that there were innocent mechanical and technological problems to blame, while secretly knowing that the primary reason for the discrepancy was the defeat device installed in every VW diesel vehicle sold in the United States."

Liang faces a maximum penalty of five years in prison and a fine up of to $250,000.

A Volkswagen spokeswoman declined to comment on Liang's employment status or on the indictment, but said the auto giant "is continuing to cooperate with the US Department of Justice."

Volkswagen settled civil cases in June over cheat devices on two-liter engine diesel cars sold in the US in an agreement valued at $14.7 billion that requires it to buy back or fix vehicles, and pay each owner up to $10,000.

A federal judge in San Francisco gave preliminary approval to the plan, which settles with owners of some 480,000 cars with two-liter diesel engines.

The German automaker has until October 24 to come up with a fix for some 80,000 cars with three-liter diesel engines equipped with the defeat devices, or face trial.

Volkswagen has faced global condemnation since US and California state regulators exposed the emissions-cheating conspiracy in September 2015.

The European Commission on Monday urged member states to crack down on Volkswagen for violating consumer protection laws, while Australia's consumer watchdog filed suit against the company on September 1.

Some analysts have estimated the scandal could cost the company $30 billion or more.
An engineer from Volkswagen pleads guilty for his role in the emissions cheating scandal.