The Obama administration in its waning days is taking companies to task in a way that it generally did not in its early years — it is getting corporations to plead guilty and charging executives in connection with crimes.
The move follows the arrest of a high-ranking Volkswagen executive last weekend and an admission of guilt by the automaker to criminal wrongdoing. Six executives were indicted this week on charges including defrauding the government and violating environmental regulations.
On Thursday, the Environmental Protection Agency accused Fiat Chrysler of installing software that enabled 104,000 diesel-engine vehicles to emit far more pollutants than emissions laws allow. The charges echo Volkswagen’s scandal, though the extent of criminal wrongdoing remains unclear. Fiat Chrysler says the software, the use of which was not disclosed to the EPA, meets necessary regulations.
In its early years, the Obama presidency was grappling with the collapse of big financial firms, whose behavior almost toppled the global economy. Hardly any executive of a global bank faced criminal charges, though the lack of prosecutions may have been in part because proving criminal intent in the trading of complex financial instruments is difficult, some officials noted.
Some current and former Justice officials say that the flurry of activity this week is the culmination of an approach that took hold a few years ago — when the department codified a requirement that companies under investigation turn over information about their employees.
The new policy directive was released in September 2015 by Deputy Attorney General Sally Q. Yates, who said holding executives accountable is “one of the most effective ways to combat corporate misconduct.” The memo, some officials said, put corporations on notice that the government would be seeking information about individuals.
Recently, companies have been pressing government investigators for resolution before the Trump administration takes charge and officials handling their cases leave, people familiar with the matter said. That is probably why some high-profile cases are being resolved in the days before President-elect Donald Trump is sworn in, they said, speaking on the condition of anonymity to freely discuss cases.
"There's absolutely been a marked shift away from out-of-court deals with companies where no individuals were prosecuted to plea agreements with companies and individual indictments," said University of Virginia law professor Brandon Garrett, author of "Too Big to Jail: How Prosecutors Compromise with Corporations."
“Companies know that it’s going to take some time for there to be a new attorney general,” he added. “If they want to put criminal cases behind them quickly, they know now is the time to settle.”
Yates acknowledged in her 2015 memo addressed to attorneys across the country that investigations into companies are complicated. Corporate decisions can span executives and departments, and it may be difficult to determine “if someone possessed the knowledge and criminal intent necessary to establish their guilt beyond a reasonable doubt.”
Analysts agree that proving the guilt of individuals is enormously difficult. But some critics say the Obama administration could have been more aggressive in pursuing high-ranking executives.
“In far too many cases in recent years, the Justice Department has been willing to allow companies to buy their way out of criminal liability and has not prosecuted individuals,” said David Uhlmann, who was head of the Justice Department’s environmental crimes section from 2000 to 2007. “But what has happened in the Volkswagen case is not new so much as it is the Justice Department getting back to basics and handling corporate crime the way it has in the past and always should.”
The penalties levied against Volkswagen, including the indictments of the six executives, is likely to give automakers pause. The wrongdoing at Volkswagen was especially egregious, analysts note, because it involved high-level managers who actively deceived regulators for a decade, according to the Justice Department.
“Other automakers are certainly dotting their I’s, crossing their T’s and double-checking every single fact and figure with relation to internal emissions testing,” said Michael Harley, an executive analyst at Kelley Blue Book. “The scrutiny on every manufacturer is going to be tougher than it ever has been before.”
Fiat Chrysler chief executive Sergio Marchionne worked to distance Thursday’s allegations against the company from those Volkswagen pleaded guilty to earlier this week. He said the issue stems from a “difference of opinion” over how facets of the software are disclosed to regulators and that it was not designed to operate differently in emissions testing than on the open road.
“There has never been any intent in putting the software on these vehicles to defraud anybody,” Marchionne told CNBC on Thursday. “We think that the software is compliant with current legislation.”
EPA officials disagreed. The agency said that software found on certain truck models allowed the vehicles to emit lower emissions in testing than they were shown to release in other driving conditions. The agency has expanded its testing for technology designed to evade regulators since the Volkswagen scandal came to light.
Agency officials said that it was unclear whether Fiat Chrysler intended for the software to deceive regulators but that the company has not provided another explanation for why it was installed.
The Fiat Chrysler announcement came one day after the Justice Department indicted six Volkswagen executives over their alleged roles in the German automaker’s emissions scandal. The company also pleaded guilty to three criminal charges, a rare admission of wrongdoing, and paid a $4.3 billion fine to settle criminal and civil investigations.
The guilty plea was particularly noteworthy as it is a punishment previous automakers had been able to escape. General Motors and Toyota paid steep fines for their handling of product safety problems that led to motorists’ deaths, but neither admitted to criminal wrongdoing, and no executives were charged. The GM settlement was announced just over a week after Yates issued her policy.
The severe penalties levied against Volkswagen and, in particular, individual employees signals to companies that the Justice Department intends to pursue and prosecute corporate decision-makers more intently than in years past, said Carl W. Tobias, a University of Richmond law professor.
“There has been discussion from the president-elect and others that they plan to not overregulate, if you will, but this seems so clearly detrimental to public health that they may have to rethink that,” Tobias said.
Brady Dennis contributed to this report.
