The brazen criminal acts of Volkswagen call for a swift and decisive response: criminal prosecution of those responsible by the United States Department of Justice. As a former regulator and one who has toiled in the private sector in both industrial and service businesses, I am shocked by the deliberate fraud of installing a “defeat device” to deceive consumers and governments alike about the emissions and performance of Volkswagen automobiles.
We are in the midst of a necessary and healthy debate about regulation and its impact on the economy. By all means, we need to correct executive-branch overreach and limit regulations to what is necessary and clearly supported by underlying statutes. Still, my decades of experience in both government and industry have convinced me that while the private sector is the driver of our growth, that does not relieve Republicans and others who understand this dynamic of the responsibility to promulgate and enforce balanced, sensible regulations. The simple fact is that businesses and individuals will find the line, so where it is drawn is important. And once drawn, that line needs to be respected, particularly by big businesses like Volkswagen.
In recent years the cultures and values of some of our largest financial institutions gave rise to a host of problems which undermined compliance with the law. The complexity of our financial system and of the laws and regulations under which they operate no doubt contributed to a drift into lawlessness on the part of the big banks. Volkswagen can offer no such defense.
Any business grapples with the tension between profits and risk. The profits side of the equation is simple: shove aside your competitors and make as much money as you can. Product, reputational and regulatory risk can be difficult to calibrate, and businesses make choices all the time about processes and internal controls designed to protect the downside. In this instance Volkswagen made a clear decision to violate the law and to defraud consumers, an altogether different calculation.
Manufacturers, particularly large operations like Volkswagen, have rigorous internal engineering and financial control systems. Nothing changes in the product or the manufacturing process without going through extensive testing and layers of review and approval. And the so-called defeat device was no small thing: it solved a central conflict between performance and emissions control bedeviling and of great interest to the company’s engineers and marketers alike. The use of the software across product lines, including not just VW but Audi vehicles as well, could only have taken place if its true purpose was understood by a large number of people within the company. The sworn testimony of the head of Volkswagen Group of America notwithstanding, it is hard to believe that “a couple of software engineers” were to blame.
Regardless of who at Volkswagen participated in the decision to go criminal, it is an absolute fact that word travels fast when regulators knock on a company’s door and start asking questions which cannot be answered with facts and data. Entirely different groups of people within the business get involved, well beyond those in engineering and manufacturing alone. If what has been reported is true -- that for months Volkswagen attributed unlawful emissions levels in actual driving to “technical” problems -- then the corruption at VW is deeply rooted and even more disturbing.
Just in the last few weeks the Obama administration reversed course. After years of inaction, the Department of Justice announced that it will renew criminal prosecutions of individuals involved in corporate crime. It is about time. The actions of Volkswagen surely merit consequences beyond fines and resignations of key executives. If the Justice Department is serious about holding individuals accountable for crimes in the workplace, Volkswagen would be a good place to start.
Mark Everson was the 46th commissioner of the Internal Revenue Service (IRS) and was president and CEO of the American Red Cross. He is currently running for the Republican presidential nomination.
