Volkswagen Aktiengesellschaft - conviction information for 2020-01-22

Corporation details
Corporation name: Volkswagen Aktiengesellschaft
Address: Berliner Ring 2, 38440
City: Wolfsburg
Country: Germany
Sector or industry: 3361 - Motor vehicle manufacturing
Case details
Location of offense: Canada-wide
Case summary:

Volkswagen Aktiengesellschaft (VWAG) is a motor vehicle manufacturing company based in Germany. Between April 2008 and November 2015, VWAG caused the import of 127,987 diesel-powered vehicles into Canada that were equipped with “defeat devices”. The makes, models and model years (MYs) of these vehicles are listed below.

For the vehicles containing a 2.0 Litre diesel engine:

(a) MY 2009-2015 VW Jetta;

(b) MY 2009 VW Jetta Wagon;

(c) MY 2010-2013, 2015 VW Golf;

(d) MY 2010-2014 VW Golf Wagon;

(e) MY 2015 VW Golf Sportwagon;

(f) MY 2010-2013, 2015 Audi A3;

(g) MY 2013-2015 VW Beetle; and

(h) MY 2012-2015 VW Passat.

For the vehicles containing a 3.0 Litre diesel engine:

(a) MY 2009-2016 VW Touareg;

(b) MY 2009-2015 Audi Q7;

(c) MY 2014-2016 Audi A6;

(d) MY 2014-2016 Audi A7;

(e) MY 2014-2016 Audi A8/A8L; and

(f) MY 2014-2016 Audi Q5.

These “defeat devices” consist of software programming that reduces the effectiveness of the vehicle’s emissions control systems, which in turn causes the vehicles to emit substantially higher nitrogen oxide (NOx) than the maximum limits prescribed by Canadian regulations. More specifically, VWAG employees designed the 2.0 litre defeat device to recognize whether the vehicle was undergoing standard emissions testing on a dynamometer or whether the vehicle was being driven on the road under normal driving conditions. The defeat device accomplished this by recognizing the standard drive cycles used by U.S. and Canadian regulators. If the vehicle’s software detected that it was being tested, the vehicle performed in one mode, which satisfied the prescribed NOx standards. If the defeat device detected that the vehicle was not being tested, it operated in a different mode, in which the effectiveness of the vehicle’s emissions control systems was reduced substantially, causing the vehicle to emit substantially higher NOx, up to sometimes 27 times higher than the prescribed standard as determined by Environment and Climate Change Canada (ECCC) testing.

The import of vehicles equipped with defeat devices is prohibited under the Canadian Environmental Protection Act, 1999.

Additionally, certain VWAG employees falsely told, or caused others to tell, ECCC by way of Notices of Defect on or about December 12, 2014 and March 10, 2015 that a software update beginning in or around 2014 was intended to improve the 2.0 Litre diesel-powered vehicles in Canada when, in fact, these employees knew that the update also used the steering wheel angle of the vehicle as a basis to more easily detect when the vehicle was undergoing prescribed-cycle emissions tests, thereby improving the defeat device’s precision in order to reduce the stress on the emissions control systems. These vehicles continued to have the defeat device that reduced the effectiveness of the emissions control systems, which caused the vehicles to emit substantially higher NOx than the prescribed standard.
Charges:

58 counts of contravening section 154 of the Canadian Environmental Protection Act, 1999 by unlawfully importing into Canada vehicles that do not conform to prescribed vehicle emissions standards, which is an offence under paragraph 272(1)(a) of the Act.

2 counts of providing misleading information, an offence under paragraph 272(1)(k) of the Act.
Enforcement notification: Volkswagen Aktiengesellschaft ordered to pay $196.5 million fine after pleading guilty to 60 charges for offences under federal environmental legislation
Conviction
Result: Guilty Plea
Date of conviction: 2020-01-22
Court level: Provincial and Territorial Court
Nature of offense(s):
  • Other
Additional details about the nature of the offense:

Importation of vehicles that do not conform to prescribed standards (58 counts).

Providing misleading information (2 counts).
Legislative details
Act Regulations Section(s)
Canadian Environmental Protection Act, 1999 (CEPA) 154 and 272(1)(k)
Sentencing
Date of sentencing: 2020-01-22
Location of sentencing: Ontario Court of Justice, 60 Queen St.W., Toronto
Sentence(s):
  • Fine
Amount of fine(s): $196,500,000
Sentencing details:

On January 22, 2020, before the Ontario Court of Justice in Toronto, Volkswagen Aktiengesellschaft (Volkswagen AG), a German-based car manufacturer, was ordered to pay an unprecedented $196.5 million fine after pleading guilty to 58 counts of contravening section 154 of the Canadian Environmental Protection Act, 1999 (CEPA) by unlawfully importing into Canada vehicles that do not conform to prescribed vehicle emissions standards, which is an offence under paragraph 272(1)(a) of the Act. The company also pleaded guilty to two counts of providing misleading information, an offence under paragraph 272(1)(k) of the Act. The fine will be directed to the Government of Canada’s Environmental Damages Fund.

The offences spanned the years 2008 to 2015. The maximum penalty amounts in the CEPA 1999 were changed from $1 million (indictable) to $6 million (indictable) on June 22, 2012. Therefore, the penalty amounts per count are broken down as follows:

- Counts Fine per count Total fine
Importation Offences Pre-June 22, 2012 amendment (max fine $1,000,000) 19 $754,000 $14,326,000

Importation Offences Post-June 21, 2012 amendment

(max fine $6,000,000)

 39 $4,466,000 $174,174,000
Misleading information offences Post-June 21, 2012
(max fine $6,000,000)		 2 $4,000,000 $8,000,000
TOTAL 60 - $196,500,000

The aggravating factors considered by the court include those found in s. 287.1(2)(a), (c), (e), (f), (g), and (j) of CEPA. The court noted the level of sophistication and deception involved in these offences, and also how prolong and global the illegal scheme had operated. The court considered the initiation of resolution discussions and guilty plea by VW AG to be the main mitigating factors.

The table below shows the distribution of affected vehicles across all provinces:

Province/Territory Number of vehicles Percentage of total
Alberta 11,928 9.4%
British Columbia 17,646 14.0%
Manitoba 2,548 2.0%
New Brunswick 1,977 1.6%
Newfoundland 639 0.5%
Nova Scotia 5,347 4.2%
Nunavut 5 0.0%
Ontario 50,694 40.1%
Prince Edward Island 317 0.3%
Quebec 32,150 25.4%
Saskatchewan 3,157 2.5%
- - -
TOTAL 126,408 -

Note: The table above is not complete. It does not account for all of the imported vehicles, which total 127,987, as it is based on either the point of the first customer sale or provincial or territorial registration, to the extent ascertained and identified by Environment and Climate Change Canada (ECCC). Nor does it necessarily reflect where all the excess NOx emissions occurred.
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