Green Energy Institute Charged Debate: Clean Air Act Series: Regulatory Carve Out Poses Challenge to VW Criminal Case

Friday, January 22, 2016

Clean Air Act Series: Regulatory Carve Out Poses Challenge to VW Criminal Case

On the Road to Cleaner Air: Jail Time for White-Collar Violators? Part III – Loophole Poses Challenge to VW Criminal Case

By Brandon Kline, Energy Law Fellow

This is the third in a four-part series on the Clean Air Act, and the legal issues arising from the probe into a nitrogen oxide trap (a "Defeat Device" in the vernacular) alleged to have been installed in vehicles manufactured by Volkswagen of America (VW). Part 1 described the manner in which a Defeat Device operates and why it matters for the Clean Air Act; Part 2 reviewed the nature of regulatory failure, alternatives to regulatory enforcement and evidence that VW’s actions resulted in premature deaths. This post discusses VW’s potential criminal liability for its alleged actions under federal environmental law.


More than 20 federal statutes have environmental crime provisions to protect our nation’s ecological and wildlife resources.

The U.S. Department of Justice’s (DOJ’s) Environmental Crimes Section works closely with investigators from other agencies to gather evidence for prosecutions affecting a wide range of economic activity.

Over the past two decades, DOJ concluded criminal cases against more than 1,000 individuals and 400 corporate defendants, leading to $825 million in criminal fines and restitution and 774 years of jail time.

Knowing Mental State (“Mens Rea”) Required.

A party is typically not culpable for a crime unless the act is accompanied by a guilty mind (i.e., mental state or “mens rea”).

Criminal intent serves to separate those who understand the wrongful nature of their act from those who do not, but does not require knowledge of the precise consequences that may flow from that act once aware that the act is wrongful. United States v. X-Citement Video, Inc., 513 U.S. 64, 72 (1994); see also Carter v. United States, 530 U.S. 255, 269 (2000) (“The presumption in favor of scienter requires a court to read into a statute only that mens rea which is necessary to separate wrongful conduct from 'otherwise innocent conduct.' “). Federal courts have routinely applied this “knowing” degree of scienter to environmental statutes.

Under this standard, prosecutors must prove beyond a reasonable doubt that harm was caused to the environment or public welfare, resulting from a knowing and voluntary action by the defendant, rather than unintentional conduct that caused the infraction. The evidence required commonly turns on the degree of harm and the nature of the offense.

Under the Clean Air Act Amendments of 1990, Congress imposed severe felony penalties for the knowing release of hazardous air pollutants that endanger public health.

Thus, it seems counterfactual that the statute does not provide criminal sanctions where, as here, an automaker is alleged to have knowingly installed a device to defeat emissions controls for criteria air pollutants that are not listed as “hazardous air pollutants” under the Clean Air Act.

Factors Influencing Whether DOJ Prosecutes Environmental Crimes.

In the Harvard Law Review , Prof. David Uhlman suggests environmental prosecutions are reserved for cases with one or more of the following: (1) significant environmental harm or public health effects; (2) deceptive or misleading conduct; (3) operating outside the regulatory system; or (4) repetitive violations.

Uhlman’s research indicates one or more of these aggravating factors were present in 96% of environmental criminal prosecutions from 2005 to 2010.

To be sure, VW’s alleged actions – installing Defeat Devices in hundreds of thousands of clean diesel cars – are likely to reach all four of the Uhlman factors.

But the automaker probably won’t face criminal prosecution for that action.

Professor Rena Steinzor explains , “the one criminal charge the company and its executive are likely to escape is violating the Clean Air Act’s requirement that all cars used in the United States have operational and effective air emissions control devices (AECD) approved by the government.”

Regulatory Loophole Favors Carmakers in Criminal Violations under the Clean Air Act.

Under Title II of the Clean Air Act, which pertains to mobile sources of pollution (i.e., cars and trucks), criminal violations are expressly exempted from section 113(c)(1) – the operative criminal penalties provisions of Title II.

Moreover, the statute does not authorize EPA to refer violations of that Title to the Department of Justice for criminal prosecution. See Section 113(a)(3). Put another way, the agency charged with enforcing the nation’s emissions laws can’t even ask a DOJ lawyer to go after the bad guys.

On the other hand, the Act subjects regulated entities, such as power plants, to stiff criminal provisions for substantially similar violations.

Why the double standard? Auto makers won this regulatory carve-out after lobbying Congress, according to the Wall Street Journal.

The Act therefore appears to protect VW from prosecution for allegedly violating the statutory provisions because of an express and implied exemption from criminal prosecution.

That puts an end to VW’s legal troubles, right? Not exactly.

While commentators note that a criminal case against VW would be messy, the government may pursue a number of viable alternatives under the Clean Air Act, such as the statute’s criminal penalties for making materially false statements or omissions in connection with documentation of Clean Air Act compliance. See Section 113(c)(2).

Beyond the Clean Air Act, “VW could be charged with any of a number of crimes, including wire fraud (for selling cars that did not remotely justify the claims in its many advertisements) and making false statements to the government officials,” Steinzor wrote.

The U.S. Department of Justice Signals Individual Accountability for Corporate Wrongdoing.

In spite of the prosecutorial factors outlined by Prof. Uhlman, white-collar defendants commonly escape criminal accountability in connection with environmental crimes because of the difficulty in proving intentional conduct.

However, Deputy Attorney General Sally Quillian Yates recently issued a memorandum on “Individual Accountability for Corporate Wrongdoing” that could shift this dynamic.

“Civil attorneys investigating corporate wrongdoing should maintain a focus on the responsible individuals, recognizing that holding them to account is an important part of protecting the public fisc (sic.) in the long term,” Yates wrote.

The Yates memo is likely to have real implications for federal investigations into corporate wrongdoing such as the VW matter.

Under this new guidance, federal investigators could be paying close attention to the scope of individual responsibility.

According to DOJ , if the Yates memo were adopted as part of environmental policy – and there has been no announcement it will – it could bring significant changes to the way that the Environmental Crime Section’s prosecutors bring criminal cases against individuals and companies that break the laws that protect our nation’s ecological and wildlife resources.

This new guidance could represent a paradigm shift for public health and welfare areas with parallel tracks of civil and criminal enforcement, such as environmental law, where crimes typically require only general intent, with simple negligence sufficient to establish criminal liability and strict liability often the standard for civil cases.

This is important: Prison time for environmental crime is the one cost that a company manager or executive cannot pass on to customers, and represents the ultimate deterrent.

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Part IV of the Clean Air Act series concludes with an overview of recent developments, including an update on the criminal probe, as well as legal analysis of the civil complaint filed by the Department of Justice on behalf of the Environmental Protection Agency (January 2016). The complaint alleges that nearly 600,000 diesel engine vehicles had illegal defeat devices installed that impair their emission control systems and cause emissions to exceed EPA’s standards, resulting in harmful air pollution.